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Financial Planning for Military Spouses

Financial Planning for Military Spouses

January 05, 2024

As many service members and military spouses are well aware, the career path for a military spouse is no walk in the park. A short history of military spouse careers would include struggles with constant moves, deployments and training, childcare challenges, cross state licensure requirements and OCONUS deployments forcing career breaks. While many strides are being made to address these challenges it is incumbent upon us to recognize these realities and plan accordingly. 

So what are some of the main challenges military spouses face when pursuing a career while their partner serves?

Career Disruption Caused by Frequent Permanent Change of Station's(PCS's)

On average military families move nearly two and a half times as often as their non-military counterparts. This frequency of displacement requires frequent job changes for any military spouse who's field requires them to show up to work in-person. For a person in pursuing a career in something like healthcare or education this could be devastating. Almost every PCS brings up the question of a period of being unemployed or underemployed, What may not be as obvious is the long-term impacts this has on a person's career and salary growth throughout their life. Frequent periods of unemployment can stunt opportunities for advancement and result lower lifetime income from both the unemployment and the slower pace of advancement to higher levels of responsibility and pay within the workforce.

Childcare Availability and Cost

Many military families come into the military with kids already or have them while in service. Unfortunately, the military does not guarantee access to affordable childcare. According to recent reporting the Department of Defense has more than 11,000 children waiting for the military to provide childcare. Given the ballooning costs of childcare, especially in areas with shortfalls of supply, many military families have to choose between a military spouse working or staying at home to provide that childcare. While the choice for a military spouse to stay at home to provide childcare may be the best financial solution in the current year, it may be at the expense of future career growth resulting in lower lifetime income and total wealth accumulation. A career interrupted will often be one that never reaches its full earnings potential. That means it may take years before the financial drag from lost employment years offsets the current year benefit of providing childcare. 

Unemployable While Living Abroad

One of the most exciting parts about being in the military community is the opportunity to live abroad. However, it comes with certain very real limitations for those military spouses who want to continue to work while they are overseas. There are immediate and obvious barriers to entry when trying to work in a foreign country like the language, laws and customs. Have you ever heard of people complain about visa issues here in the U.S.? Well it can be just as daunting for someone to secure authorization from a foreign government to work while stationed Outside the Continental United States (OCONUS). If a military spouse is seeking to simply retain their employment at their current company and transfer to a new office abroad they may find that the company is not willing to let them go without signing completely new employment paperwork. Afterall, in a different country there are different laws, taxes and norms that govern how employees are treated. Sometimes this can be a big hurdle. For certain professionals they may find that their professional certifications are simply not recognized in the new country leaving them with few viable options to maintain the type of employment they want.

Planning a Career as a Military Spouse

There are a few resources that may come in handy when looking at pursuing a career as a military spouse. The first thing to do is to get connected with a other military spouses with similar goals that have paved a path before you. Some great organizations include: The National Military Spouse Network (NMSN), the Military One Source's Spouse Education & Career Opportunities (SECO) program, and The D'Aniello Institute for Veterans & Military Families.

Even with all the resources at your back sometimes there will be situations where you end up unemployed or underemployed. As a military spouse the data suggests this happens more often and has negative financial consequences. While that may not be avoidable in every circumstance what you can do is prepare for it to occur and not get caught off guard financially. Typically speaking this means keeping much larger than normal cash savings on hand to prepare for lapses in employment or not being able to find adequate compensation with a new employer. This extra cash cushion allows for more time between jobs without causing financial distress or simply gives you and your family more time to adjust to a tighter budget.

Another consideration with unemployment or underemployment is a drop in retirement savings. Even though a military spouse's income decreases they may be able to still keep up with their retirement savings through an account called a spousal IRA. Even if you have little to no income, so long as you file as married filling jointly on your tax return, you may be able to contribute to a spousal IRA. The normal income limits apply to be able to contribute to an IRA but probably won't effect you unless the service member is a field grade officer with over fifteen years time in service. This tool allows one spouse to contribute funds to another spouse's IRA on their behalf. This is incredibly important in order to stay on track with retirement savings and secure as much of a tax shelter as possible.

Disclaimer: Consult a professional for tax and financial planning advice. This article should not be construed as tax advice or financial advice. This blog post may be helpful but there a number of pitfalls when executing tax strategies and you should consult with a professional before attempting to implement any such strategy. All photos are from open source domains.