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Financial Planning Considerations for Veterans and Military Service Members – Social Security, Medicare and VA Benefits

Fifth Third Bank


Short- and long-term financial planning remains a very real challenge for many military service members and veterans.

Veterans are generally eligible for Medicare, Veterans Administration (VA) and Social Security benefits, but the details of how to fully claim all the benefits to which they’re entitled is considerably less clear.

So how can active duty service members and veterans be prepared to best coordinate and utilize these programs as medical and personal needs can change over time?

The following guide can help.

Social Security

Most veterans are eligible for Social Security benefits, and will receive full credit for military earnings—and, in some cases, perhaps more. (1)

For those who served between 1957 to 2001, for example, you may be eligible to have extra earnings contributed to your record. Special credits are granted for active duty or active duty for training. Inactive duty training, however, is not counted in determining these extra credits.

Furthermore:

  • For those who served between 1957 and 1967: Social Security will contribute the extra credits when you apply for benefits.
  • For those who served after 1967 through 2001: The credits are automatically added to your earnings record.
  • For those who served after 1988: Earnings from inactive service, such as the Reserves, are covered as well.

Such extra earnings credits could potentially open up the program to veterans who might not otherwise be eligible based on their earnings record or result in an increased level of benefits. Always review your earnings record prior to applying for benefits under any circumstances.

Be aware: Social Security survivor benefits may impact the payments distributed under the Department of Defense Survivor Benefit Plan, which provides up to 55 percent of a service member’s retired pay to an eligible beneficiary upon the death of the member. To ensure your beneficiaries receive the maximum benefit it is important to understand the ways in which your financial situation affects your eligibility under both plans. (7)

Retiree medical benefits

Retired military and spouses under age 65 are eligible for TRICARE—a wide-ranging health program covering a number of current and former military members, including: (3)

  • Uniformed service members and their families
  • National Guard/Reserve members and their families
  • Survivors
  • Former military spouses
  • Medal of Honor recipients and their families
  • Retired active duty service members and their families
  • Retired Reserve/National Guard members and their families

At age 65, you are eligible for TRICARE for Life coverage as well as Medicare benefits.

TRICARE for Life beneficiaries must enroll in Medicare Parts A and B when eligible (usually by age 65), and this program serves as evidence for credible coverage to satisfy those requirements should you or your spouse decide not to enroll in a Part D drug plan.

Coverages and costs will vary by classification, and the TRICARE website is a good place to start learning more about this program and how it applies to your status.

VA benefits

The VA offers a wide range of health coverage for military veterans—from preventive care to diagnostic and surgical services. Whether retired or not, most veterans and some members of the Reserves or the National Guard are eligible for VA benefits. Typically veterans must have served for at least 24 continuous months or for the full period they were called to duty in order to be eligible. (2)

Beyond the basic eligibility described above, veterans with the following status could be eligible for enhanced eligibility:

  • Former prisoners of war (POWs)
  • Recipients of the Purple Heart
  • Recipients of the Medal of Honor
  • Those having a service-related disability of 10% or more
  • Those receiving a VA pension
  • Those discharged due to a non-pre-existing disability, early out or hardship
  • Those who served in a theater of operations for at least five years post-discharge
  • Those who served in various campaigns, such as Vietnam or the Persian Gulf, between specific dates
  • Those classified as “catastrophically disabled” by the VA
  • Those who earned below the income threshold for the prior year for their geographic area

Coordination of VA benefits and Medicare

When deciding whether to use Medicare benefits or your VA medical coverage there are a few things to consider—most notably, out-of-pocket costs and which program provides the most extensive coverage for the service/procedure you are seeking.

Current Medicare policy is that it is never the secondary payer after the VA. And neither program will pay for the same service that was covered by the other. You must choose which benefits to apply each time you visit the doctor or seek medical treatment. (4)

If the VA authorizes services for you in a non-VA facility but did not authorize all of the services performed during your stay, then Medicare may pay for those additional services. If you receive services from a VA facility, Medicare will usually not cover these costs.

For those who enrolled in TRICARE for Life and Medicare, Medicare typically pays first for any covered services. TRICARE then pays the Medicare coinsurance and deductible amounts for services covered. If the service isn’t covered by either Medicare or TRICARE, you must pay out-of-pocket.

Long-term care

Though neither Medicare nor the TRICARE for Life program offer long-term care (LTC) insurance per se, both cover some costs associated with skilled nursing care related to a medical condition and other treatments. VA benefits offer a degree of coverage for those eligible, including nursing home programs, home health care, and domiciliary care programs. (5)

Active and retired service members and eligible relatives should also consider applying for the Federal Long-Term Care Insurance Program (FLTCIP), a long-term care insurance program administered by the government in conjunction with private insurers. (6)

When considering LTC insurance, analyze what is actually covered by a given plan and its costs, then compare that information to other sources of LTC insurance to find a plan that fits your needs and circumstances.

Summary

There is a world of resources and enhanced programs designed to benefit veterans and their eligible dependents. The key is awareness and access. A session with a financial professional or counselor well-versed in Social Security and Medicare benefits—including how these programs can be integrated with other military benefits—can help you and your family maximize the options made available to you.