Entitlement

I’ve heard a lot of discussion, for and against, government forms of support – Medicaid, SNAP, housing, etc. Most of the comments seem to focus on who should or shouldn’t receive the help – but none of those making the comments fit what I would see as “qualified experts”; which to me is individuals who have worked in these spaces or are experts on the benefits themselves.

It feels like there is a LOT of anger about those who don’t “deserve” benefits receiving them. In fact, on more than one occasion I’ve been told the government is doing “too much”; and everyone seems to have a story about someone they know who “deserved” benefits not being able to receive them. Yet when I ask clarifying questions to understand what led to the benefits being disapproved I’m met with disgusted looks and/or change of topics.

As I’ve said before, I do not doubt the system is being abused. I’ll even admit it’s “broken”; but I believe we should look at making repairs and tweaks – rather than do away with the entire thing. Let’s focus on Medicaid to provide a concrete example. And we should be very careful about what changes we make – beware unintended consequences.

Medicaid is health insurance for those with disabilities and the destitute. There is discussion in progress cut $1.4 Trillion (with a “T”) in Medicaid (See Article Here). Sounds reasonable – save the government money. However, this could force States to reduce their funding, hurting those who need assistance most. “The Congressional Budget Office estimated on a preliminary basis that Graham-Cassidy would result in the loss of health insurance coverage for “millions,” cap federal Medicaid payments to states, and give states the option of imposing work requirements on parents with children over age 6 (Andy Schneider, 2/12/2018).”

Yes, people need to work. But what if you have a child with significant support requirements, and one of the parents is a full-time provider? This occurs more often than I think most people not impacted by a disability realize. These families are not advertising their situation, they are putting their heads down and doing everything they can to survive. In many cases they didn’t ask for this and without the extra funding face losing their homes.

Safety nets, like Medicaid and SNAP, are in place for a reason. If you find yourself begrudging someone of this assistance, ask why. In some cases it almost sounds like jealousy – yet when you peel the onion back those same individuals complaining have, more often than not, made some poor life choices putting them in the negative financial situation they are in – without the option of a government “bailout”.

Again, this is a generalization. Yes, there are deserving people who cannot get services. My son, for example, did not get approved for the amount of SSI I had expected and a few of the items I filed with the VA were found to not be “service-related”. There are processes in place to contest findings you don’t agree with; or you may have to learn to live with it. If you want to increase the odds of your success, talk to those who have gone before you.

But don’t fault another family for doing what they need to do to survive. You don’t know their circumstances – when was the last time you were completely open about what was going on in your life with a complete stranger (who wasn’t your physician)? Want to change the system(s), look for ways to create opportunities for those less fortunate than yourself. Offer hand-ups, not hand-outs – and stick to what you control. I think you’ll be happier for it.

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Veterans Pension (VA)

There is a LOT to cover when discussing Veterans and Survivors Pension (VA), this post is going to focus on income – because I have found it to difficult to determine how much income someone can earn, and maintain eligibility. Included are links to the information I found, and if anyone reading this has new/different data (and can support it) please post in comments. I will make multiple posts as I explore the VA pensions.

Income is defined as “payments of any kind from any source” (Statute 3.271); and includes recurring (equal amounts and at regular intervals); irregular (unequal amounts or irregular intervals); Nonreccuring (one-time basis during a 12-month period); Salary (gross earnings); Business, farm or professional income (depreciation and losses may not be deducted from other income sources); income from property; and installments (total amount anticipated/received over 12-months).

When considering income, you are allowed to make certain deductions to determine your eligibility (get your income below the threshold). For a veteran without a spouse or child, 2018’s annual income must be below $13,166 (Veteran Pension Tables). For a survivor w/o a child, the annual income is even lower – $8,830 (Surviving Spouse Table).

The following items will not be considered income:

Welfare – donations from public/private relief agencies. Maintenance – “The value of maintenance furnished by a relative, friend, or a charitable organization (civic or governmental) will not be considered income.” VA pension benefits are not counted as income. Casualty loss reimbursement. Property sales (profit) and joint accounts (when the individual becomes sole owner through the death of the other owner). Survivor benefits are not counted.

In certain cases, unreimbursed medical expenses may be used to reduce an individual’s income (verbatim from Code):

(i) They were or will be paid by a veteran or spouse for medical expenses of the veteran, spouse, children, parents and other relatives for whom there is a moral or legal obligation of support;

(ii) They were or will be incurred on behalf of a person who is a member or a constructive member of the veteran’s or spouse’s household; and

(iii) They were or will be in excess of 5 percent of the applicable maximum annual pension rate or rates for the veteran (including increased pension for family members but excluding increased pension because of need for aid and attendance or being housebound) as in effect during the 12-month annualization period in which the medical expenses were paid.

This is just a very light overview of all the variables to be considered. If you know a veteran, surviving spouse or disabled child who earns less than $15k my recommendation is find a veteran service organization (VSO) and work with a chapter service officer to submit a fully developed claim. VSOs do NOT charge money to help veterans and their dependents file a claim – this is a FREE service. For a list of VSOs click here.

 

Forever GI Bill

Fellow veterans – there have been a LOT of changes lately, offering new, and expanding the reach of old, benefits. Below is a highlight reel of the Forever GI Bill (but don’t let this be the extent of your own research); subsequent posts will expand on other changes. This is a long post (21 bullets), please at least skim to determine if any apply to you. Unless otherwise specified, these changes will take effect 1 August 2018.

Forever GI Bill (aka Harry W. Colmery Veterans Educational Assistance Act)

  1. Reserve Duty counts towards Post-9/11 Eligibility – Reservist authorized (ordered to AD) medical care, disability evaluation or health care study on or after 11 Sept 2001 counts as Active Duty towards eligibility.
  2. Purple Heart Recipients – anyone who was awarded a Purple Heart on or after 11 Sept 2001 is eligible for 100% benefit for 36 months.
  3. Yellow Ribbon Extension – Recipients of the Fry Scholarship and Purple Heart will be covered under the Yellow Ribbon Program.
  4. Yellow Ribbon Extension to AD Service Members – AD Servicemembers may use the Yellow Ribbon Program effective 1 August 2022.
  5. Consolidation of Benefit Levels – see chart, effective 1 August 2020.
  6. Reserve Educational Assistance Program (REAP) Eligibility – Reservists who established eligibility under REAP prior to 25 November 2015, and lost it due to the sunset provision, may elect to have that service credited towards the Post-9/11 program.
  7. Monthly Housing Allowance (MHA) – Will be calculated based on zip code of campus where student is attending the majority of classes, rather than location of the institute the student is enrolled.
  8. Changes to Licensing & Certification Charges – Entitlement charges will be prorated based on the actual amount of the fee charged for the test.
  9. Assistance for Students Affected by School Closures and Certain Disapprovals – VA is now authorized to restore benefits & provide relief. There is a LOT to this, read here.
  10. Transfer of Benefits Changes – Can now transfer entitlement if the original dependent dies prior to using the entitlement. Dependents can transfer entitlement to other dependents if Servicemember/Veteran dies. Applies to deaths on/after 1 August 2009.
  11. More benefits for Science, Technology, Engineering and Math (STEM) Programs – Another benefit with a LOT to it, read here.
  12. 15-Year Elimination – Time limitation is removed for individuals whose last discharge or release from AD is on/after 1 January 2013. Also applies to children of deceased Servicemembers entitled on/after 1 January 2013 and all Fry spouses.
  13. Reserve Components MHA – VA will prorate MHA for Reservists.
  14. Pilot Programs for Technology Courses – I haven’t seen much detail, just a heads up it’s coming.
  15. Work Study Expansion – Expiration date (30 June 2022) has been removed for certain qualifying work-study activities in which an individual may be paid additional educational assistance allowance.
  16. Changes to Survivors’ & Dependents’ Educational AssistanceDecreased entitlement from 45 months to 36 months. Also increases amount of educational assistance payable under the Survivors’ and Dependents’ Educational Assistance Program.
  17. Technical Schools and non-Institutions of Higher Learning – Must be accredited; expanded to include area career and technical education schools.
  18. Priority Enrollment – VA improving outreach and transparency about which institutions administer a priority enrollment system.
  19. Informing Schools about Beneficiary Entitlement – VA must make available to educational institutions information about the amount of educational assistance to which a beneficiary is entitled under chapter 30, 32, 33, or 35.
  20. Reserve Component Benefits – Guard and Reserve members with service in the Armed Forces occurring on/after 30 June 2008 may be able to receive Post-9/11 benefits.
  21. GI Bill Monthly Housing Allowance – Individuals who first use Post-9/11 on/after 1 January 2018 will receive monthly housing allowance based on DoD’s reduced basic housing allowance (BAH). Those that began using benefits prior to January 1, 2018 will continue to receive a higher monthly housing rate based in the non-adjusted BAH rate

When Is Your “Independence Day”?

July 4th is Independence Day for those of us living in the United States, and it brings to mind thoughts of what independence means – is it the same for everyone; or, as I suspect, do each of us hold our own ideal close to our heart – perhaps never sharing?

Certainly, the freedoms guaranteed by our Constitution mean a LOT to me, I’m proud of the years I served in the Navy; but I don’t consider myself truly “independent”; at least, not yet. In my mind I won’t be “independent” until I’m confident my son will be able to have a life worth living on his own – this should not be confused with “surviving”. Until this happens, he’ll be dependent upon me; which to me means I’m not “free”.

This is not a pity party or a complaint, but it is my reality – and I think for many of you reading this there is a similar reality. I think we plan our whole lives for when we don’t have to answer to anyone, when we can just do what we want when we want (well, I KNOW this was my plan). However, reality is seldom so black and white.

My “independence day” is on the horizon, and I have a strong belief I will live to see it – my son’s own independence continues to grow in leaps and bounds; and thanks to technology things we once thought would be insurmountable can either now be done, or will be achievable in my lifetime, without much more effort than it takes to open an app.

For those of you reading this – what does freedom mean to you? Are you doing everything you can to achieve it; or are you waiting for someone else to give it to you? If you’re waiting, don’t! To the best of my knowledge independence has never been achieved without a LOT of effort from those desiring it. I’m not suggesting you storm the ramparts or take up arms against the establishment; but if you don’t at least contribute the achievement of your goals will you truly value them? Heck, will you even recognize when they come true?

So set your sights on what freedom means to you, and map out a strategy to get there and get moving. If you’re fortunate enough to have achieved your freedom, extend a hand and help others – encouraging words go a LONG way, so don’t be shy or afraid to offer praise. Celebrate the little victories, and don’t let losses bog you down – learn the lessons they are meant to teach and forge ahead. Finally, remember it’s hard to know you’ve arrived at your destination if you’ve never identified where you are going.

Don’t Let the Tail Wag the Dog

I enjoy coaching business owners, helping them determine where they can increase efficiency and dial in their focus running the business – as opposed to the business running them. Over the years I’ve found some very common themes – “not enough time” and “too much to do”; both of which can be addressed by stepping outside the business and looking at it as a perspective buyer, rather than the owner. Buyers look for opportunities and weaknesses (so they can bid the price down), they’re not emotionally invested in the company and won’t make excuses about why something is happening.

Unfortunately, many of us get so wrapped up in the day-to-day operations we lose sight of the bigger picture – where we want our company to be in 5, 10 or 20 years; and what is the core service or product our business provides. If you don’t have a vision for your company, or if you can’t put your finger on the core service/product, then ask yourself why you’re a business owner. Sure, there’s a lot of hype right now encouraging people to be entrepreneurs and chase their passion; but that passion may be met through hobbies or volunteering at much less cost than starting a business.

Same goes for “side hustles”. Unless you’re working part-time for someone else, you should be treating your hustle like a business. If you’re an Uber or Lyft driver, or you rent room(s) on Airbnb, then understand what your expenses are – please don’t delude yourself into thinking what you earn is “all profit”. I would also like to encourage those of you with side hustles to ask yourself “why”. Why do you have the hustle, what is the money going to help you do? Take this answer and make sure you’re taking the steps necessary to follow through.

Perhaps you’re saying “sure, this all sounds like a great idea; but you just don’t understand how busy I am”. Again, I challenge you to think as a buyer. Do you care how busy someone is, do you let them off the hook for a poorly delivered service or product? No, of course you don’t – so why are you treating yourself any different?

Make the time. Set at least one day each month aside for your business. Instead of arguing how much business  you’re going to lose (cost); think of it as an investment which will increase your profits by improving efficiency and honing your focus. Create an agenda for your day, and follow it. It’s going to feel weird at first, and maybe you’re not super productive right away – it’s a new skill and it’s going to take time to get good at it. Don’t give up, push through. If you’re not sure how to start find a mentor or hire a coach.

I need to stay busy, but I don’t like to waste my time. Think back to why you started your business or side-hustle; I’m willing to bet it wasn’t so you filled your every waking moment with work. Be honest with yourself, do you really want to run a business? Be okay with the answer, whatever it is, and take the necessary steps to be successful. Just do something.

How to Transition to a Monthly Paycheck

For most of our working years I think it’s safe to say just about all of us receive our checks weekly or every other week; and plan to pay our bills accordingly. Speaking for myself, while on Active Duty my wife and I designated the 1st’s paycheck to the mortgage and the 15th’s to our living expenses. Simple and easy to repeat; and I’d wager many others do something very similar.

I never considered what would happen if I was only paid once per month – and although I “knew” it’s what would happen when I retired from the Navy I wasn’t ready for it. It’s a different dynamic, even if you’re being paid the same or making more; because if it’s something you’re not used to it’s easy to spend like you have another check coming at the halfway point – and if you’re used to weekly paychecks it can be even worse.

To add insult to injury, it’s likely there is going to be a gap of at least (1) month between your last regular paycheck and your monthly check when transitioning to a military pension or social security. It could be even longer if you’ve filed a VA claim, I believe the current wait for fully developed claims is (6) months – a fully developed claim is one in which all supporting documentation has been provided and the VA forms have been completed correctly.

So what can you do to help yourself?

At least six months, a year would be ideal, start gradually transitioning to paying your bills within the first week of the month.

First, figure out your living expenses. Start with tracking all your spending, Mint.com is a useful tool; but many banks will include a similar tool. This will tell you how much you need to earn, and if you’re not interested in transitioning to another job/career; it will help you determine if, and where, you need to cut back. For those who are Active Duty and are being paid BAH cut your expected earnings by almost 2/3 – because you will receive ~50% of your base pay only (whatever percentage you’re entitled to, it’s calculated off your base pay). If your expenses are more than your new income you have two choices – find another income source (not credit cards or other debt instruments) or dial back your expenses.

After you’ve calculated your living expenses and your monthly income, train yourself to live off one pay period.  For most of us this is going to take some coordination, because we don’t have sufficient savings to serve as a buffer. Start small, with a bill or two that are fairly consistent – like phone and/or cable. You know how much you need to set aside, and can plan for it by dialing back accordingly.

When you’re ready to start, set aside 1.5x’s the amount of the bill(s) you’re adding to the first of the month; and I recommend putting this somewhere other than your everyday savings/checking. You’re saving more than you “need” to build the habit and get you used to having less money available from your other checks. This also gives you the extra money you’re going to need to have available on the first of the month. If you cannot afford to save the full amount, then start by setting aside at least an extra $25. The less you can afford to set aside the more time you will need to give yourself for the transition, because we want the habit firmly anchored before the transition occurs.

The goal is a complete transition to paying all your bills on the first of the month before you leave the work force. This isn’t the only way to do this, and if it doesn’t appeal to you my hope is it has at least got you thinking about when you’re only going to have a monthly check. Don’t hesitate to get help if you need it, in this particular case I would recommend a fee only (hourly) planner – Garrett Planning Network, NAPFA, and the CFP Board all have “Find an Advisor” tool; to name a few organizations.

 

 

Do You Have/Need an Exit Strategy?

Recently I’ve been receiving not so subtle reminders of how finite our lives are, and how much of a difference having a plan can make. I think we can all agree it’s impossible to plan for every eventuality, but I also think we can all agree there is at least one exit we are all going to make – to the best of my knowledge nobody has found the secret to immortality in our present state (this is not meant as a religious or philosophical post).

I remember how torn I was, weighing whether to reenlist or not. I retired with over 20 years, but if I’m completely honest with myself it’s not because I loved the Navy. The biggest reason I stayed was fear – I wasn’t sure what I would do about health insurance for my son – having received the Autism diagnosis in the early 2000’s and there not being much information available (that we were aware of). This had negative consequences – I was not someone anyone would want to be around; I felt trapped and took it out on everyone around me.

I think many, if not all, of us can relate to feeling trapped at some point in our lives – be it in a marriage, or a job or some other contract. And because this can be so overwhelming it’s easy for us to lose sight of options, convincing ourselves there is absolutely nothing we can do to make our situation better – regardless of what those around us may be proposing.

If you have kids, do you let them go through high school without talking to you about what their plan is after graduation? If the answer is “no”, then why are you treating yourself any different? This leads me to having an exit strategy – begin with the end in mind. Sounds trite, perhaps; but it will make a significant difference.

For example, no-one marries with the intent to divorce; but even if you don’t divorce the odds are one of you will outlive the other – even if it’s 50+ years down the road. Have a discussion of what you want, how you want to be remembered and where you want to be laid to rest – and put it in writing. Yes, this is an Estate plan; but it’s not meant to be set in stone – review it at major milestones, or at least every 5 years if you have nothing going on.

Another example I come across is similar to what I experienced in the Navy – people are afraid to leave their jobs (not just the military) because of uncertainty; will they make enough money, what else would they do, etc. In this case, my advice is to build yourself a “freedom fund”. Save money into an account with the strict purpose of giving you a buffer. How much is up to you, but I would suggest at least 6 months of income. I would also recommend you make a list of what is non-negotiable. What do you absolutely have to have – could be a minimum salary, specific benefit(s), etc; and also what you are completely unwilling to have in your life – could be too much autonomy, a micro-managing boss, specific working hours or days of the week, etc.

If you take nothing else away from reading this, please take the time to understand what’s most important to you. Don’t be upset or feel like you’re doing something wrong if your internal values don’t match your coworkers or friends – these are your values. When you are considering a change, especially a major one, take a moment to consider possible consequences. I’m doing this with my clients all the time, as I’d wager most Advisers are. Take it for what it’s meant to be, a glimpse of other possibilities; not finding fault with your ideas.