An active duty Marine for 12 years and a reserve officer until 2012, Rob Aeschbach is well aware of the unique financial and emotional challenges that face military families. But he didn’t start thinking about becoming a financial planner until he started volunteering at the Navy-Marine Corps Relief Society and saw so many of his fellow sailors in economic distress.

Last year, he launched the Military Financial Planner in Norfolk, Virginia, a fee-only advisory service aimed at a narrow niche: young men and women serving in the military. These clients have distinctive needs that aren’t well-served by planners who don’t understand the tumult of military life, he says. Indeed, traditional planning advice — such as suggesting that clients put as much money as possible in tax-deductible retirement plans and stretch to buy a home — can prove economically devastating to servicemen and women.

“People who are otherwise smart with their money can get in real trouble by buying a home,” Aeschbach says. In the military, “we move so often and on such short notice that you end up having to sell the house — or rent it out — often at a loss. Buying a house can wipe away a lot of your savings.”

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Traditional planning advice, such as suggesting that clients stretch to buy a home, can prove devastating to servicemen and women.

Likewise, where most young couples are well-advised to save in tax-deductible retirement plans, military men and women gain little from upfront tax benefits, he says. That’s because a significant portion of military pay comes in the form of housing, food and separation allowances — things that are not taxable.

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RICHER IN RETIREMENT
Because you can retire with a pension after just 20 years in the military, retirees can be in their late 30s or early 40s when they leave the service. That gives them 20-plus years to develop second careers. The combination of military pensions and, often, savings from additional decades of civilian work can leave military men and women richer in retirement than when working. Thus, where a civilian is well-advised to sock money away in a tax-deductible 401(k) plan, military men and women are better off with Roth accounts, which do not offer deductible contributions but provide tax-free withdrawals at retirement, he says.

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The combination of military pensions and, often, savings from additional decades of civilian work can leave military men and women richer in retirement than when working.

Emergency savings are far more pivotal for military families than for the average civilian, Aeschbach says. And that’s not necessarily because servicemen and women are prone to emergencies. Instead, the complexity of the military pay system causes frequent pay shocks — sudden deductions for past overpay that you would never be aware you had received. Because military paychecks include so many elements — there are roughly 40 different types of pay that can be triggered (or eliminated) by everything from a deployment to a move — it’s tough to know what any given month will bring, he says.

Moreover, it’s not uncommon to be overpaid for a period of time and then have the government suddenly recognize the error and recoup the overage, docking the service member sometimes by thousands of dollars in a single month.

“I tell people that they have not had their last pay problem yet,” he says. “Your pay is constantly changing because of cost-of-living adjustments, travel allowances and combat assignments. You can’t possibly know whether your check is accurate, so you need to have an emergency fund to handle the recoveries when they happen. They will happen.”

BEAT UP BY THEIR FINANCIAL INNOCENCE
But the need for unique planning advice isn’t what lured Aeschbach into the niche. It was seeing so many young people being beat up by their own economic naiveté. The Marine Corps recruits about 35,000 young men and women fresh out of high school each year. Other branches of the service recruit heavily from high schools, too. That populates military bases with a lot of 18-year-olds, who feel flush when they start receiving their first regular paychecks.


With little practical experience with money, these young people are easy prey for the financial sharks who surround military bases. Promising easy financing, businesses peddling everything from cars and furniture to high-end electronics line the streets. And while the financing is easy to get, it’s high-cost, with interest rates often reaching 20% and 30%, Aeschbach says. Far too many servicemen and women quickly find themselves in hock, struggling to pay for essentials like food and diapers.

“These kids have no idea that it’s not normal to pay 40% of your income for a car payment,” he says. “They are making bad choices, but they don’t realize it because everybody around them is making bad choices too.”

Admittedly, trying to talk an 18-year-old into economic restraint sometimes feels like “pushing the tide back with a broom.” But when you see a little of yourself in every client, inspiration isn’t hard to find.

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“They are making bad choices, but they don’t realize it because everybody around them is making bad choices too.” — Rob Aeschbach, The Military Financial Planner, Norfolk, Virginia.

FIRST-HAND EXPERIENCE
Although he would like to think he made better financial choices when he was a young Marine, Aeschbach can empathize with both what his clients are going through — and what they’re likely to face as military families in the future. He joined the Marines fresh out of the Naval Academy at age 22. Ten years later, he fell in love with a Navy officer when they were both stationed in California. Their nearby assignments didn’t even last a full year before both were transferred and ended up several states away from each other. Aeschbach realized that — like many military families — one of them would need to put the career on the back burner if they wanted to start a family.

When the couple wed in 2002, Aeschbach switched to the reserves so he could allow his wife, now a captain in Navy intelligence, pursue her career. That has meant following her from city to city and agreeing to be the parent in charge of their two boys, now ages 12 and 13. Once his sons started school and Aeschbach had more free time, he started volunteering at the Relief Society, a charity for economically troubled seamen and women. The experience convinced him that servicemen and women desperately needed specialized financial counseling. So he went back to school to get the education and credentials necessary to hang out a shingle as a fee-only planner.

The Military Financial Planner now has about 25 clients who pay him $150 an hour for financial planning work that can range from investment guidance to helping with budgets and home finance — all with an eye to the unique issues of military life. The practice can’t yet pay the bills for a family of four, but he expects it to be self-supporting in about a year.

Still, “underemployment” is a frequent complaint of military spouses, who have a tough time re-establishing themselves when transfers pull them to a new city. Recognizing that relocation could be a threat to his new business, Aeschbach has set up his practice to market primarily via the web and to communicate with clients via Skype, rather than in person. That suits both his clients, who are scattered around the globe, and his wife, who wants the flexibility to deploy wherever the Navy may need her.

“Being in the military is hard; somebody has to make compromises all the time,” Aeschbach says. “I felt this community needed specialized help.”

Kathy Kristof

Kathy Kristof, a Financial Planning contributing writer in Los Angeles, also contributes to Kiplinger's and CBS MoneyWatch.