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Before leaving active duty, there are several things that military service members should do to get ready for civilian life.
Top of the list is being financially prepared for the transition and beyond.
“It’s not just about changing your job, it’s about changing your way of life,” said certified financial planner Bill Sweet, chief financial officer of Ritholtz Wealth Management in New York.
Sweet understands those challenges. He served in the U.S. Army, rising to the rank of captain before leaving in 2007. During his service, he was stationed in Iraq during the Iraq War and earned a Bronze Star.
“The military gives you this identity,” he added. “You know where you fit in and the role you play. The civilian world is very murky.”
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Each year, almost 200,000 service members return to civilian communities. Because the military is very structured, they’ll need to learn to be more proactive in civilian life and take more control over their career and financial well being, Sweet said.
“Uncle Sam isn’t going to do it for you anymore.”
The most important thing is to make a plan ahead of time, because the separation process is going to be stressful enough, said Tara Falcone, a CFP and founder of financial education company ReisUP. She is also a former hedge fund analyst and is married to an officer in the U.S. Navy.
For one, there are a number of deadlines to meet when it comes to making various decisions about your financial life, such as what to do with your military life insurance.
“A lot of times, when you are in a transition or stressful life experience, those deadlines creep up very quickly,” she said. “You don’t want to be in a position where you make a rash decision.”
Here are six financial strategies for life after military service.
Start saving before you leave
The first step of any financial foundation is building a savings account.
If service members start socking away money before they leave the military, they’ll have a nice cushion during their transition period, Sweet said.
If it isn’t something you have already started, at least begin about six months to a year before you are discharged.
“Having cash in the bank gives you options to move to a different city, maybe take a pause and pursue a new degree or new training opportunity or wait for the right role open to open up,” he said.
Take advantage of the GI Bill
The Montgomery GI Bill Active Duty, which is a Department of Veterans Affairs education benefit that active duty members earn, can be a “fantastic” resource for veterans, Sweet said.
There is also the Post-9/11 GI Bill for those who served on active duty for at least 90 days after Sept. 10, 2001, as well as a Montgomery GI Bill Selected Reserve for reservists with a six-year obligation who are actively drilling.
For those who feel they need further education to get their next job, the GI Bill can help foot the costs for things like tuition, books and housing.
Members can sign up while in the service and get up to three years of education benefits when they leave. The amount of the benefit depends on the length of service.
For example, someone who was enlisted for at least three years and goes back to college full time is eligible for $2,050 a month under the Montgomery GI Bill.
The Post-9/11 GI Bill pays all tuition and fees for in-state students attending public colleges or up to $24,476.79 a year at a private or foreign school — if the person was enlisted for at least three years.
There is a sliding scale for those who were active for less than three years.
Save for retirement
When you leave active duty, you’ll have to find a new way to put away money for retirement.
“You have to continue saving,” said Sweet. “If you don’t save, you are setting yourself up for failure.”
That means opening up an individual retirement account — either traditional or Roth — or contributing to a 401(k) or 403(b) plan with your new employer.
You also have to decide what to do with your military retirement funds.
Unless you have more than 13 years in active duty, you are likely a part of the U.S. military’s new program, called the “Blended Retirement System.” It combines a traditional pension with a defined contribution plan, similar to a private sector 401(k). That defined contribution plan is the federal government’s Thrift Savings Plan (TSP).
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The military gave members who have served less than 12 years the option to move into this plan on January 1, 2018, instead of sticking with the legacy pension, which is only earned if the person served for 20 years. Most people never stay that long. People with 12 years or more of service at that date were grandfathered into the legacy pension plan.
You can either keep the TSP funds in place or you can roll them over into your IRA or 401(k) or 402(b).
It comes down to what works best for you. The TSP has “very low fees” and is much simpler than a 401(k), with fewer investment options, Falcone said.
“If you want low fees and continued simplicity, then maybe keeping some of it in the TSP is the way to go, and then open another account,” she said.
However, if you’d rather keep everything in one account so it is easier to track, roll the TSP into your new retirement account, as long as the fees are still reasonable and the investment options are good, Falcone added.
Protect your health
Without health insurance, you could be one hospital visit away from financial disaster.
If you retired after 20 years of active duty service, you are eligible for insurance through Tricare, which also provides coverage while on active duty. You also may get Veteran Affairs health care coverage for any condition related to your service.
If that’s not the case, you’ll have to look into getting insurance outside of the military.
To start, Sweet recommends extending your active-duty coverage temporarily through the Continued Health Care Benefit Program while sorting out your next move.
It provides health-care coverage for 18 months to 36 months post-service.
“It helps you buy time,” Sweet said. “There is an education that needs to happen for someone who has to choose a health-care plan.”
David McNew | Getty Images News | Getty Images
Use the time to sort through your options — whether you eventually get coverage through a new job or have to find a plan through the Affordable Care Act.
Also, educate yourself on what you need to be financially responsible for, Falcone said.
While you don’t have to worry about terms such as deductibles, copays, coinsurance, out-of-pocket maximums or coverage limits under the military’s plan, it’s another story when you transition to a new health plan.
Be aware of tax changes
You should be ready for a bigger tax bill, which is probably the “most abrupt change for many service members,” Falcone said.
When in the service, members get different types of tax benefits, like the tax-exempt basic allowance for housing. Deployment pay in combat zones isn’t taxed federally and many states do not tax military member’s income.
“You will ultimately receive less take home pay even though it looks like you are earning the same gross income,” she said.
Unless you get a big bump in pay, you may need to consider lifestyle changes and budgeting adjustments to make up for the reduced income.
Decide on life insurance
Like health insurance, you’ll eventually lose your life insurance coverage once you leave active duty. You can only keep it for 120 days post-separation, Falcone said.
If you want to continue holding a life insurance policy, you can convert the Servicemembers Group Life Insurance (SGLI) to the Veterans policy (VGLI) without proof of good health or after a physical.
You can also roll it into a whole life insurance policy, which like the name implies covers you for life. Falcone doesn’t recommend this for most people due to the expense.
WeWork’s first staff meeting after layoffs outlines path to profits
- WeWork Chairman Marcelo Claure addressed employees at an all-staff meeting on Friday morning after major layoffs on Thursday.
- He said focusing on six key areas, including selling new products and pitching WeWork in a different way, would help the business grow profitably.
- WeWork also named four men to executive roles: chief transformation officer, interim chief marketing officer, chief product and experience officer, and chief people officer.
- Claure said that, in the future, WeWork would add more women to the executive team and its all-male board.
- For more WeWork stories, click here.
“It’s been three long weeks” since WeWork Chairman Marcelo Claure’s last staff-wide address, he told employees at WeWork’s all-hands meeting Friday, where he outlined a path forward for the embattled office company.
In those three weeks, WeWork started layoffs, announced plans to outsource 1,000 facilities employees, and fired staff for abusing vendor policies, among other changes, as executives work to stabilize the company after a tumultuous fall.
Now it’s time to move forward, Claure told employees. He outlined how the company would do that through focusing on six pillars, and he named four men, including two from SoftBank, to executive roles.
And, marking a departure from founder Adam Neumann’s vision for WeWork as a technology company, Claure repeatedly emphasized the company’s real-estate characteristics.
“We are starting to disrupt the legacy real-estate office space,” one of his slides said. “We are in the midst of giving birth to a new category … We are the world’s No. 1 coworking and space-as-a-service platform.”
WeWork has big growth plans, according to sources familiar with the matter: It’s going to double its locations in the next 10 months, thanks to an ambitious growth plan started by Neumann before he was ousted in September. The company will be in 1,200 buildings next year and predicts to have a total of more than 1 million members.
In slides presented by Claure to employees during the meeting, WeWork’s financial goals are to be adjusted EBITDA positive in 2021, cash-flow positive in 2023, and to be a profitable company.
6 pillars of focus
Claure addressed the company wearing a black WeWork T-shirt, sport coat, and pants, the only color coming from a pair of powder-blue sneakers, according to an image from the meeting viewed by Business Insider.
He laid out six “pillars” for WeWork as it moves forward:
- Member and employee experience: Claure emphasized the experience “as the core differentiator” and explained how the company would support community teams — in-building staff who serve tenants, called “members” in WeWork parlance.
- Be the partner of choice: to members, brokers, businesses, and landlords. For brokers, WeWork will now highlight costs per employee, instead of costs per square foot.
- Focus on core business, building by building: Claure wants each building to be profitable. Later on, the company will introduce dynamic pricing to adjust to changes in supply and demand.
- Expand geographically “in a smart & profitable way”: WeWork plans to focus on its top 12 markets, which include New York and London. In the next 16 largest markets, the company will explore management and revenue-sharing agreements, which will see WeWork share responsibility with third parties. In Asia-Pacific, the company will continue expanding its joint ventures, and for emerging markets, franchising will be a focus in the future.
- Monetize spaces and sell products: New products could include city and global memberships. WeWork will also think through options for making more money out of buildings, including by renting conference rooms and spaces for events. Services include design components like soundproofing and storage; technology includes “premium internet,” virtual private networks, and cybersecurity; and business services include human resources, insurance, legal, and tax help.
- “Operate with a cash-conscious-owner mentality”: WeWork will “be a more accountable organization,” with discipline and clear roles.
WeWork’s co-CEOs — Artie Minson and Sebastian Gunningham — are staying in their roles. At Friday’s meeting, Claure named four men to new senior roles.
He also said that the company would focus on diversity in the future. At multiple staff meetings, employees have criticized the company for a lack of diversity at the top. Claure said WeWork planned to name women to its all-male board.
These are the new roles:
- Chief transformation officer: Mike Bucy, who’s tasked with making sure WeWork executes its six pillars. He comes from SoftBank, which he joined in 2018 after he was a partner at McKinsey.
- Interim chief marketing and communications officer: Maurice Levy, who’s the chairman of ad and communications agency Publicis Group. Levy briefly addressed staff on Friday, wearing, like Claure, all black, according to an image viewed by Business Insider.
- Chief product and experience officer: Ralf Wenzel, who is a managing partner at SoftBank and has “proven CEO-caliber leadership,” per Claure. Wenzel spoke with employees wearing a black WeWork “do what you love” shirt, according to an image viewed by Business Insider.
- Chief people officer: Matt Jahansouz, who was promoted internally. He joined WeWork in February after nearly nine years in HR roles at Goldman Sachs.
The company has one vacancy on its organization chart: chief financial officer and head of real estate.
In other HR plans, Claure outlined a new compensation structure, with a base salary, merit increases, and a cash-bonus program. Multiple sources told Business Insider that WeWork lacked a formal compensation plan, with bonuses seemingly more dependent on relationships than on performance.
The new cash-bonus plan will take into account the customer net promoter score, the company’s financials, and an employee promoter score.
At the last all-hands meeting, Claure said WeWork would “put dashboards together so we can all see how we’re performing in a daily, weekly, monthly basis and we’re going to share that we’re going to have a culture of total transparency.”
Get in touch! Contact this reporter via encrypted messaging app Signal at +1 (646) 768-1627 using a nonwork phone, email at firstname.lastname@example.org, or Twitter DM at @MeghanEMorris. (PR pitches by email only, please.) You can also contact Business Insider securely via SecureDrop.
China is out of economic ammo
The Chinese government has issued vague but stern-sounding warnings that it will retaliate for a bill passed by Congress that would require the White House to protect human rights and ensure the territory’s autonomy. But China’s options for economic retaliation are limited. And most of these options have already been exercised amid President Donald Trump’s trade war.
China’s most obvious method of retaliation would be to stop buying American goods. But China has already imposed tariffs on $135 billion worth of products. Sales to China from all over the US have plunged.
The agricultural industry has been hit especially hard. Farm bankruptcies are up 24 per cent this year. Farm bankruptcies are up 24 per cent this year, and a report by the American Farm Bureau Federation finds that almost 40 per cent of farmers’ income this year will come either from insurance payouts or government bailouts. This is an economic catastrophe for farmers and a headache for exporters. Few expect exports to China to recover even if the trade war ends tomorrow because China has found other suppliers. Even those US exporters who are still selling their goods in China must realise their situation is shaky; if they’re wise, they’re already looking for alternative markets. So China has little left to threaten on the trade front.
The other big weapon in the Chinese arsenal is investment. The Chinese government is traditionally a major buyer of US government debt, and it holds the second-biggest stash of Treasuries (after Japan). Over the years, many have fretted that a spat between the US and China would lead the latter to sell off that mountain of debt, creating a world of hurt for the US financial system and economy. But this danger is vastly exaggerated. As recent experience demonstrates, the US simply doesn’t need Chinese government cash. In 2015 and 2016 China experienced one of the biggest capital flights in history, with about $1 trillion pouring out of the country. This resulted in a huge drawdown of China’s foreign-exchange reserves, most of which are US bonds. If the US were heavily dependent on Chinese government financing, interest rates on US debt — and by extension, throughout the US economy —should have risen. Instead, they fell.
If China can dump a quarter of its US bond holdings and not cause a noticeable movement in American borrowing costs, then the threat represented by the remaining three-quarters probably is small. The US, like the rest of the developed world, is simply awash in financial capital. Unloading its reserve stockpile in retaliation for US actions toward Hong Kong would put China in greater danger than the US Without the cushion of reserves, a repeat of 2015-16 could lead to a classic emerging-market crisis in China, with capital outflows forcing a sudden currency depreciation, devastating the financial system and bringing the economy to a sudden stop. One final thing China could do is restrict its exports of rare earths, a crucial input for many technology products. China now dominates production of these commodities. But as my colleague David Fickling has noted, this threat also is minimal; when China cut off rare-earth exports to Japan in 2010 as part of a geopolitical dispute, Japan simply teamed up with an Australian company to find new supplies, quickly breaking China’s monopoly. The US could easily replicate this feat. So China has few economic weapons left with which to threaten the US over Hong Kong. It will likewise be powerless to retaliate over other geopolitical and humanitarian disputes, such as US condemnation of the mass internment of Muslims in China’s Xinjiang province or territorial spats in the South China Sea. For that matter, China’s continued ability to escalate the trade war seems limited. But China does have other weapons at its disposal. The kind that explode.
In pushing China over everything from trade to human rights to Hong Kong’s autonomy, the US should remember its own history. It was relentless US economic and diplomatic pressure over Japan’s invasion of China that pushed that country into launching a surprise attack on Pearl Harbor in 1941. With its economic arsenal depleted, China could at some point decide that a harder form of retaliation is in order.
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