Returning Troops Face Financial Challenges

BOSTON ( TheStreet) -- Earlier this month, President Barack Obama announced that 10,000 servicemen will be withdrawn from the war effort in Afghanistan.

It will be the first wave in a troop reduction that will reduce the military presence by 33,000 by the summer of 2012. Troops stationed in Iraq will also continue to be scaled back in the months ahead.

As soldiers shift back stateside, managing their money will require extra care.

As more and more of the troops return stateside, they face a variety of issues and challenges -- not the least of which are financial.

"Having gone through that not too long ago, there is certainly a financial aspect to that adjustment," says J.J. Montanaro, a certified financial planner practitioner with USAA, which specializes in financial products and services for military personnel and their families. Before entering the financial services industry, he served in the U.S. Army for six years on active duty, including spending 2005-06 in Afghanistan, and in 2009 retired as a lieutenant colonel in the U.S. Army Reserve.

"You are coming back and all of a sudden the taxes that weren't an issue while you were deployed are coming back into play," he says, referring to the suspension of income tax during active duty. "There are extra allowances you had while deployed that go away, and a lot of times there are reduced expenses while you are deployed."

All these things can lead to necessary cash-flow adjustments, considering the potentially decreased income and likely increased expenses.

Montanaro estimates that for some enlisted men and women, combat pay could be reduced by as much as 25% once they return home.

Soldiers who participated in the Savings Deposit Program while serving in a combat zone will have 90 days to withdraw or transfer those accumulated assets once their tour of duty ends, and deposits must stop upon being transferred out of a combat zone. The SDP is a military-run savings account that offers 10% annual interest on deposits.

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