From the outside, life in the armed forces looks privileged: housing is taken care of during service, the Canteen Stores Department (CSD) offers household items, including big-ticket purchases like cars and electronics, at subsidized rates and medical expenditure is covered while you are in service and even after you retire, to a great extent. Then, there is a sizeable pension to make retirement comfortable. But when you consider the fact that signing up for the forces also means signing up to face a bullet or a bomb, or, on a less morbid note, be ready to live in remote locations away from family for prolonged periods, the privileges don’t seem abundant.

Though many things work in favour of military personnel from the financial standpoint, that doesn’t obviate the need for a financial plan. “Protecting the family financially and planning for life after service are the two main challenges for a military person. Many people in the military are on short service commissions. Other ranks such as jawans also retire early," said Prakash Praharaj, founder of MaxSecure Financial Planners, a financial planning firm.

Here’s why it’s important for military personnel to have a financial plan and the things they should keep in mind.

Need for a plan

A few factors make financial planning important for India’s military families. First, many of these are single-income households. For instance, Suhas Jatkar, 57, a retired Army officer who is now settled in Pune, says his wife who was a lawyer by profession couldn’t practise law because of the transferable nature of his job. That meant a sacrifice on his wife’s part and a single-income household. “The transferable nature of a soldier’s job makes it difficult for his wife to settle down and build her own career," Jatkar said. That is why military families are usually vulnerable to loss of the single income they depend on.

Second, fulfilling goals such as holidays, big-ticket purchases and children’s education needs planning or such expenses can upset your cash flow. “A lot of financial decisions are taken by the spouses of serving personnel because of the serving soldiers’ long absences from home. Without proper financial awareness, they can fall prey to mis-selling," said P.V. Subramanyam, author of Retire Rich, Invest 40 a Day, and personal finance trainer.

Third, retirement comes early. “Typically, jawans retire in their mid-30s and officers in their mid-50s," said Jatkar. “Not all of them are able to take up a new career, since they are not trained for the same."

Things to keep in mind

While financial planning is different for different individuals, the basic tenets remain the same.

This means protecting your wealth is the first box you need to tick. The good news is medical expenditure is paid for, so health insurance may not top the charts on insurance requirement.

“Armed forces personnel should look at buying a cover for children who have attained adulthood and who will no longer be covered by parents’ government-provided health insurance," said Yashish Dahiya, chief executive officer, Policybazaar, an insurance aggregator. “In the case of retired individuals, the government-provided health insurance scheme (ex-servicemen contributory health scheme or ECHS) is very good. However, big-ticket top-up plans covering expenses from 5 lakh to 1 crore can also be very cost-effective and helpful," he added.

Military personnel have life insurance while in service, but the cover may be insufficient. Mint spoke to some retired officers at different ranks who indicated that the life insurance cover depends on the rank and ranges from 50 lakh to 75 lakh. Financial planners advise a term insurance policy to supplement this cover. “Military officers need to top up on life insurance to ensure they are well insured. In addition, they should look at personal accident plans and critical illness cover, especially for diseases where treatment is needed abroad," said Dahiya.

The next step is to create an emergency corpus. A thumb rule that applies is saving six months’ salary in liquid instruments. “Keeping a higher emergency corpus is particularly important in covering the period immediately after the end of service," said Praharaj. “It can also be used to meet unplanned or emergency family expenses when the person is on duty. We recommend placing one to two months’ worth spending in a savings account and the rest in liquid funds," he added.

When it comes to investing, your approach needs to be the same as that of any other individual: assess your risk appetite, chalk out all your financial goals and get your asset allocation in sync with them. The long-term goals will, typically, need higher equity investment. “Military service and risk-taking in physical life does not always translate into a financial risk appetite," said Vinit Iyer, co-founder, Wealth Creators Financial Advisors, a financial planning firm. “Some of my clients in the armed forces have only 10-20% of their corpus in equity," he added.

Suhas Phatak, a retired air force officer, feels that his investment in equity allowed him to achieve some of his financial goals, unlike many of his peers. He feels that the salary alone was only sufficient for monthly expenses.

Armed forces employees also get a pension at the end of their service. Up to 50% of the monthly pension can be “commuted" or taken as a lump sum. This is an advance payment of the pension receivable and can amount to a huge sum. This commutation is not taxed, making it an attractive option for big-ticket goals like buying a house or funding children’s education. Using it properly without compromising on retirement is an important financial decision for military personnel.

Last but not least, military personnel need to ensure that their will is in order. Although they are required to make a will to ensure that all military-related benefits smoothly pass on to the legal heirs, they should also make a will for their personal assets and remember to update this at the time of retirement.

India’s soldiers, sailors and airmen are risking their lives each day for the country and the country, in turn, provides for many of their financial needs. A good financial plan can fill in the gaps.