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The Cyberspouse: January 2007
Financial Security and the Foreign Service Spouse
Many Foreign Service spouses are disappointed with their career prospects. Few of us were raised and educated to throw dinner parties for a living, and, two incomes can come in very handy for, say, buying overpriced Washington DC real estate, or paying multiple college tuitions. It’s a familiar tune.
But there is another, nagging, concern at the back of many a spouse’s mind that goes beyond the lack of an impressive resumé or income potential. It is the fear of total financial dependence in an uncertain world.
The divorce rate in the Foreign Service mirrors the national average, by all accounts, and so, presumably, there is no inherent risk of divorce due to living overseas. A strong marriage will survive the experience, and a weak one will not. But, people change and grow overseas just as they do back home, and divorce in the Foreign Service does have unique financial implications, especially for the accompanying spouse. Therefore, even in the strongest marriage, a spouse should take steps to ensure her financial security just in case the family loses its breadwinner.
And then there's the danger factor: Foreign Service Officers are currently being posted in active war zones. Unaccompanied tours and danger pay are now commonplace. According to the Secretary of State, all FSOs should now expect to serve at least one unaccompanied tour during their career. That’s at least a year out of every FSOs life during which he or she will likely be at considerable physical risk. We spouses should all hope for the best, but be prepared for the worst.
The Cyberspouse will therefore briefly outline some basic rights that all Foreign Service spouses have, and suggest some ways that we can all ensure that should the unthinkable come to pass, we would have the financial security that we deserve. For simplicity’s sake, and in deference to the majority, this article will assume a female Foreign Service spouse. But, rest assured that the content applies to male spouses as well!
Put your name on everything
Departing for your first Foreign Service post as an Eligible Family Member can feel a bit like jumping off a cliff. Suddenly, you are completely subject to the whims of the Department of State, and considered to be decidedly secondary to your spouse. This can be difficult when you are used to being treated as an independent adult! You need to exert whatever control you can over the situation, not only for financial security, but for your own peace of mind. Establishing ownership of your possessions and investments is a good first step.
Many spouses are taken by surprise when they find out that they have little official capacity to deal with their own belongings! The State Department, for example, ships a car for each employee, but not for his spouse. You can’t ship your own car (unless you add your husband’s name to the title) but you can make darn sure that any car you ship to post, or that you buy at post, has your name on it. Consult with your local Department of Motor Vehicles for assistance in adding a name to the title. If you are a co-owner of a vehicle, the State Department will not ship it anywhere without your permission. (The Cyberspouse presumes that this means that post would not permit the sale of such a vehicle without the permission of both owners, as well.)
Make sure that you get that Joint Property Statement signed and notarized before you leave for post—this gives you the rights to everything that is stored at government expense. Without that statement, only the employee can access stored items, even if those items are actually yours. Joint Property Statements are a standard procedure in the Foreign Service, and the Family Liaison Office can help you arrange one. A sample form is available here (see Chapter 11, page 98.)
As for the items that are shipped to post (HHE and UAB), these are the property of the employee. However, the State Department will pay for a portion of the HHE to be shipped back to the U.S. in the event of marital separation. It is, however, up to the employee and the spouse to divide up their own belongings, which could leave a spouse who is ready to get out of the country in a rather vulnerable position. In addition, any items shipped home for the spouse are subtracted from the weight allowance of the employee. This could be an argument in favor of leaving family heirlooms and other irreplaceable items in storage back in the U.S. if you feel that your marriage is uncertain for any reason. For more information about this rather murky area, read the chapter titled “The Unthinkable Can Happen: Divorce in the Foreign Service” in Realities of Foreign Service Life, or consult with FLO Support Services.
Finally, it goes without saying that any real estate should be held jointly. Your house is often one of your biggest financial assets, and that becomes more important when you give up your job to follow an FSO around the world. The equity that accumulates in your absence is as much yours as his, and you want to make sure that you have full access to it in the event of an emergency. If your name is not on the deed to the house for some reason, or if you have changed your name since you bought the house, then the Cyberspouse strongly suggests that you update the deed, a relatively simple (and inexpensive) process. More information can be found in this article from bankrate.com.
Maintain a separate financial identity
Here’s something to keep in mind: “Foreign Service spouse” is just a small piece of who you are. It is not the entire package, by any means. Yes, your Commissary shopping privileges and diplomatic passport may be defined by your husband’s job, but very little else needs to be. You have the Internet, your means of direct contact with the real world outside the Foreign Service bubble. Use it to create an independent financial identity for yourself!
The Cyberspouse strongly believes that no Foreign Service spouse should board the plane to post without making sure she has direct access to all major savings and checking accounts. It’s fine to have small individual accounts, but the account to which the employees’ pay is deposited should be joint, because, frankly, both the employee and the spouse are going to be earning that money while overseas--one at the office, and the other everywhere else at post!
The spouse should have online access to all accounts, and should either manage the family finances herself, or receive regular updates from the officer if he is the hands-on financial manager. This responsibility goes both ways, obviously, and modern technology makes it easy. The Cyberspouse is the financial manager in her family, and she sends a status report automatically generated by Microsoft Money by email to her husband at the end of every month. She also uses a freeware program called KeePass to store all account numbers and passwords in an encrypted file on her computer. All the Cyberhusband has to remember is one master password, and should the Cyberspouse suffer an untimely demise (or run off with her personal trainer) he would be able to access all the family accounts, investments, and insurance policies.
In addition, every spouse should also keep some money in an easily accessible checking account in her own name. Michelle Singletary, financial columnist for the Washington Post, says that her grandmother called this a “home wreckin’ hussy fund,” meaning money you want to be able to get your hands on quickly in case your husband runs off with another woman! Some things never change, and what was good advice for her grandmother remains good advice today. This account can double as a business account for tax purposes if you happen to be self-employed.
Finally, every spouse should have credit in her own name. That means at least one separate credit card on which you are the primary account holder, not a card that is held on your husband’s account. As any college student can tell you, you do not need to have an income of your own in order to get a credit card. Use this card regularly, paying off the balance monthly, of course. A history of responsible credit card usage in your own name will be your best friend should you ever need to apply for a car loan or mortgage on your own, especially given that you will probably have a rather sporadic work history as a Foreign Service spouse.
Planning for retirement
Most Foreign Service couples count on the State Department pension and Thrift Savings Plan (TSP) as the mainstays of their retirement income. These assets are definitely earned by both partners in a way that few private sector retirement plans are. But what, exactly, are your rights should your officer leave you in the lurch?
According to the Family Liaison Office, a divorced spouse has automatic rights to a pro-rated share of up to 50 percent of the employee’s pension as long as they have been married for ten years, at least five of which were during active government service, and as long as she does not marry again before the age of 55. (The Cyberspouse is not sure what the rationale is behind these particular rules—why, for example, the spouse cannot remarry but the officer can--but it is nevertheless important to be aware of them.)
In the event of the death of an employee who is covered by the Foreign Service Pension Plan and who has worked for at least ten years, the surviving spouse is entitled to pension benefits based on 50 percent of the employee’s final salary or “high-three” average salary, whichever is higher. Benefits vary according to the length of service and other factors.
For more detailed information regarding your rights to FSPS benefits, check out this page on the AFSA website, look up Chapter 20, Contingency Planning, in the FLO publication “What Do I Do Now” or contact FLO Support Services.
The Thrift Savings Plan does, in fact, belong entirely to the employee, but a spouse is not without legal recourse in the event of a divorce. The TSP will disclose account information, for example, to facilitate division of assets, or will freeze withdrawals during divorce proceedings if under court order to do so. More detailed information about this process is available online in the TSP publication "Court Orders and Powers of Attorney."
The death of an employee is a more straightforward matter. The TSP account is then automatically inherited by the surviving spouse, by the children equally if the spouse is no longer living, and so on through a set order of precedence. A different beneficiary may be designated by the account holder to override this order of precedence if so desired, and in fact, in the event of a divorce, this must be done if the employee wishes for someone other than the ex-spouse to inherit.
In the Cyberspouse’s opinion, it makes sense for any spouse to make sure that she is the beneficiary of her officer’s TSP account, just in case some earlier condition existed that might confuse matters--for example, a previous marriage. More information about designating beneficiaries, as well as a form for doing so, can be found on the TSP website.
Other investments
While the TSP is usually the primary means of saving for retirement for Foreign Service couples, there is no reason that a spouse can’t invest some money in her own name as well. Anyone who earns an income, no matter how minimal, can open a Roth IRA. Even couple of hundred dollars per month earned teaching piano, for example, could add up to a lot over time if you invest all of it through an automatic investing plan. Contributions can be as low as $25 per month if you sign up for an automatic investing plan. Roth IRAs can be used for retirement, a down payment on a first home, or for other purposes such as college tuition. They are a well-regarded medium- to long-term investment vehicle.
You don’t even need to earn an income to open a conventional IRA in your own name. You can fund an IRA in your own name with contributions from your husband’s salary. IRAs of both types, as well as mutual funds and other investments, can be opened online through a variety of financial institutions including the familiar State Department Federal Credit Union and USAA Federal Savings Bank. Motley Fool offers a good basic guide to both Roth and conventional IRAs to get you started.
Insurance coverage
It goes without saying that the primary breadwinner in every family should have a substantial life insurance policy. The question is: how much? Motley Fool offers a guide to life insurance which includes a calculator for figuring out just how much life insurance to buy. Life insurance needs can either increase of decrease over time, and it’s a good idea to revisit the amount of coverage from time to time. USAA is one company offering reasonable rates on term life insurance to Foreign Service employees.
Long-term care insurance is another good idea for primary breadwinners, and is offered through the American Foreign Service Association (AFSA.) The Office of Personnel Management also offers a long term health care package.
Health insurance coverage is another question for Foreign Service spouses. If an officer dies, his spouse is entitled to continue participating in the Federal Employees Health Benefits Plan (FEHB) provided she has been designated as a beneficiary by the officer, and provided the officer had been enrolled under the Self and Family plan at the time of death. This applies to both current and retired FSOs. So, every spouse should definitely make sure that the answer to both those questions is “yes!” For more information, visit the FEHB website.
Make the most of your employment history
Very few Foreign Service spouses who are not officers themselves manage to maintain the same career momentum as their employed partners. You should, however, make the most of what you have accomplished professionally, by keeping a record of all your paid and volunteer activities and any recognition you may have received for them. Start a file, if you haven’t already, for your awards, certificates of appreciation, certifications of training, thank-you letters, and even copies of your W2s as a reminder of the dates of your employment. (Scan these papers into a folder on your computer for backup.) If you are self-employed, give your business a name, proudly call yourself the owner, and give your business a professional appearance with business cards, a brochure, or even a simple website.
The Cyberspouse, who has a typically unorthodox work history, recently assembled her own resumé for the first time in nearly twenty years and she was amazed at how these bits and pieces of her peripatetic life came together to form a respectable resumé. She is very thankful that she started that file long ago, and would be even more so if she were suddenly forced to support her family.
A certain degree of financial dependence is part of the Foreign Service spouse job description. But, there are many, many things that you can do to ensure your own financial security and that of your children in the event of the loss of the family breadwinner. The Cyberspouse encourages you to set aside some time this New Year to review your own situation, for your own peace of mind!