Retiree spousal benefits

Q: As an Air Force retiree and divorced, will my new spouse be eligible for retired benefits, such as an ID card and medical care?

-Joe, Europe

A:  Joe, sign her up!  Your new spouse will be eligible for medical benefits after you register her in the Defense Enrollment Eligibility Reporting System (DEERS).  This registration will also allow her to get an ID card.  Don’t forget to check out your options when it comes to the Survivor Benefit Plan (SBP).  Remember, I'm a big fan of that program!  On the SBP front, your options will depend on what happened during your divorce.  Assuming your former spouse is not covered, you have up to one year to contact DFAS to update or change your old election, otherwise your old coverage and premiums will apply to your new spouse.  If the divorce decree provides for SBP coverage for your ex-wife, then your new spouse is out of luck.

Splitting military retirement can be complicated

Q: My ex-husband entered the active army in 1973. We were married in 1974. He was active duty for 3 years; from 1976 to 1995 he was in the reserves. In 1995 he went into the AGR and is planning to retire in 2013 as an O6 with an active federal retirement. We were divorced in 2007 after 34 years of marriage. Our divorce decree states that I am to get 50% of the retirement he earned while married plus SBP. I am on track with all the paperwork according to the Former Spouse Division in Cleveland DFAS. My question is, how can I calculate what my monthly check will be in 2013 so I can work with my financial planners?

-Sandra, Wester, Ohio

A:  That’s a very good and forward-thinking question. Unfortunately, you have not provided enough information for me to provide an accurate estimate. If we assume 26 years of active service (21 on Active Duty or AGR and 5 equivalent years from his time in the reserves), O-6, and 3% inflation, his monthly retirement pay check in 2013 will be approximately $7,000. You can use the calculator at the Office of the Secretary of Defense website to determine his retired pay. 

However, for you, the more important question is how much will your benefit be worth and how will it be calculated? You need to head back to your attorney to clarify the answers to these questions. It’s more complicated since you were married both during reserve and active duty service. It almost seems as if your divorce decree was written purely for reserve retirement (in which points determine retirement benefit and points earned while married divided by total points, is an easy calculation). Talking with a financial planner is a good thing and finding out exactly what you can count on are all positive steps as you plan out your retirement. I do know that you don’t want a surprise in 2013, so start knockin’ on your attorney’s and DFAS’ door for more specifics. Good luck!

When you're marrying the girl...and her credit

Q: I have excellent credit, but my fiancée has bad credit.  How will that affect our future purchases?  Can you give me some tips and advice?  By authorizing her to use my credit card, will I affect my credit score?

-Ronaldo, U.S. Army

A: Wow, what a great and insightful question!  I’m pleased that you’re thinking about your life together rather than just being in the moment.  Very smart.  I’m glad she’s your fiancée and not your wife…yet.  There’s still some work to be done before the big day.  The question you need to ask, discuss, and work out is whether your fiancée’s poor financial habits will jeopardize your marriage!  Because, of course, money is a major source of fights and more serious marital challenges.  I would definitely recommend frank financial discussions about spending habits, saving for goals and budgeting before you get married.  It would be wise to even consider professional counseling on this front.  It is that important. 

Now to your specific questions.  First, her bad credit score could most definitely have a negative impact when you make joint purchases.  It could result in higher interest rates, lower credit limits, and even impact the availability of credit.  In the case of a mortgage, you could pay hundreds more in interest every month due to a poor collective score!  And, I know that is hard-earned money in the Army!  See examples on www.myfico.com.  Allowing her to be an authorized user on your credit card, in and of itself, will not affect your score—that is unless she exhibits the same behaviors that might have resulted in her poor credit record. 

So, assuming that you two have that all-important financial pow-wow, and agree to be jointly responsible, I would work on building up your fiancée’s credit by taking the following steps:

• Start by having her pay down any credit card balances to 50% of the maximum allowable balance (ie., a $10,000 limit would call for a balance of $5,000 or less), then work her way to 35% with the specific goal being zeroing out her cards.  This helps to illustrate responsible use of available credit.
• Pay “charge offs” listed on her credit report. That could be an old cell phone (I have personal experience with this one!), a medical bill or any number of things.  This will help to drive up her score because she is showing financially responsibility.
• Use credit responsibly.  You will likely need credit to purchase your first home together. And you want the best score possible.  To have a good score, you need to use credit – but don’t overuse it!
• Make payments on time every time! 

You can ruin a credit score practically overnight!  But repairing it takes a lot of time.  Be patient and persistent.  It will be worth it.  Make a “Monthly Money Date” part of your lives now and especially as you marry. You both need to stay on top of your finances so that you may live within your means, pay the lowest possible interest and achieve your joint financial goals.  Good luck in your lives together!

VA Loan not available for ex-spouse

Q: I am a civilian and my husband is active duty, we are getting a divorce.  Am I entitled to his VA loan benefit for a home for our child and me?

-Rebecca, N.C.

A:  Sadly, I’ve written a lot about marriages breaking up in this column.  When it comes to divorce, my best advice is to find a competent attorney that is extremely familiar with the unique characteristics of military service and all that comes with (and because of) it.  This includes sort of abstract things like benefits, allowances, entitlements, retirement, etc.  So, while military retirement, active-duty income, and even the requirement for your husband to provide an allowance to house you and your child may be up for grabs and debatable, his VA loan entitlement is not.  Unfortunately, you can not use his VA loan benefit. 

Be sure to protect yourself, and your child, by finding a quality attorney.  To be fair, both parties should go on with their lives with emergency funds in tact, a plan for housing as well as education funding for the kiddo.  Another consideration that is often overlooked is ensuring sufficient life insurance is in place with the proper beneficiaries to continue child support payments should something happen to your ex while your child is still a minor.  The best of luck to you!