The Academy Insider Podcast - Your Guide to The Naval Academy Experience

#117 Midshipman Pay and Taxes - On The Yard (008)

• GRANT VERMEER • Season 3 • Episode 117

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Learn about Midshipmen Pay at the Naval Academy.  As someone who admits to being completely clueless about pay and deductions during my own time as a midshipman, I'm excited to break down everything you need to know about the financial side of academy life.

From base pay calculations to mysterious deductions, from retirement planning opportunities to scholarship possibilities, we're covering the complete financial picture that affects every midshipman family. This episode pulls back the curtain on topics that often leave families with more questions than answers.

What You'll Discover About Midshipman Finances

  • How midshipman base pay is calculated and what you actually receive each month
  • The truth about the ACE "loan" and why it's not actually a loan at all
  • Understanding your Leave and Earnings Statement (LES) and why checking it matters
  • Personal deductions that cost $160 monthly - and how to get your money's worth
  • State of legal residence strategies that could save thousands in taxes
  • Why midshipmen can't contribute to TSP but can open IRAs

Advanced Financial Strategies and Opportunities

We explore the complexities of held pay accounts, scholarship acceptance rules, and 529 plan usage restrictions. You'll learn about the significant payout opportunities that come with understanding these systems, plus practical advice on maximizing the financial benefits available during your academy years.

Whether you're a current midshipman, concerned parent, or future academy family, this episode offers valuable insights into the financial realities of Naval Academy life. We cover everything from the basics of monthly pay to advanced strategies for building wealth during your academy years.


The Vermeer Group is a residential real company matching military families with trusted real estate teams across the country.  If you have any real estate questions at all, please text Grant at (650) 282-1964 or email grant@thevermeergroup.com

To stay most up to date with Grant, Naval Academy updates, and real estate insights, follow him on LinkedIn

The mission of Academy Insider is to guide, serve, and support Midshipmen, future Midshipmen, and their families.

Grant Vermeer your host is the person who started it all. He is the founder of Academy Insider and the host of The Academy Insider podcast. He was a recruited athlete which brought him to Annapolis where he was a four year member of the varsity basketball team. He was a cyber operations major and commissioned into the Cryptologic Warfare Community. He was stationed at Fort Meade and supported the Subsurface Direct Support mission.

He separated from the Navy in 2023 and now owns The Vermeer Group, a residential real estate company that matches service academy families with trusted real estate teams all across the country. Text (650) 282-1964 with any real estate questions.

We are here to be your guide through the USNA experience.

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If you are interested in sponsoring the podcast, have an idea, question or topic you would like to see covered, reach out: email podcast@academyinsider.com or text Grant at (443) 951-3064

SPEAKER_00:

Alright team, we are talking about money today. This is gonna be a super fun episode here on the Academy Insider Podcast. We're gonna be talking about midshipment base pay, we're gonna be talking about health pay, we're gonna be talking about the ace, the quote unquote ace loan, which is really just in advance for clothing and equipment. We're gonna be talking about retirement accounts, the ability to contribute to a TSP or an IRA. We're gonna be talking about scholarships, grants, 529 plays, plans, and then also taxes as it relates to the world of being a midshipman. Again, this is not meant to be a purely like a full detail conversation about certain things. This is provide context, provide perspective so you can be asking the right questions and getting context on how this all works in the Naval Academy world. I hope you enjoy it. I think this is a fun episode. I'm excited to kind of go over everything. So check it out, let me know what you think, and I hope you have a great day. All right, let's talk about money. Let's talk about money. I think this is gonna be a super fun topic because as I was going over and preparing for this, and I were actually gonna bring out a notebook for this episode because there's so much stuff in here that it made me realize when I was a midshipman, I had no idea I was not paying attention to what was going on in my pay that was happening as a midshipman. And it's fascinating to me because again, now as a 30-year-old, I looked back at 18-year-old me and I was like, dude, what were you doing? You had no idea what you were making, what was being deducted, what was going in, what was going out. I had no idea. I just showed up and I knew I got a little bit of money from the Naval Academy every month, and I was like, cool, like that sounds great. And now I look back at myself, and now as like an old guy at 30 years old, I'm like, oh my gosh, like, how did I not pay attention to any of this? And it's actually so wild because I had my godfather, Gary Martin, if you're listening, shout out, I love you so much. I had my godfather send me a picture literally on Facebook, like two days ago, a picture on Facebook, and it was me in the Navy basketball uniform as a plebe, 18 years old, and I was like, holy smokes, I look like a baby, dude. Like, I look like an absolute baby. And it's just putting into this full thing of perspective to me now. Again, when it comes to almost the adulting aspect of the Naval Academy, is understanding that you are receiving a pay stub, you are receiving a pay statement, you're gonna have entitlements, you're gonna have deductions, you're gonna be paying taxes, you're gonna be doing all these things that I just never really fully grasped when I was at the Naval Academy. And so if there are midshipmen listening, I hope you do pay attention and grasp this topic, but also for all the parents out there, so you get a better understanding of what's actually happening behind the scenes for your midshipmen. Again, I think this would be a really interesting episode. But we're gonna start off with the base pay because again, midshipmen are gonna receive base pay, like a flat salary amount, and that is set by Congress at 35% of an 01 base pay. So an 01 under two years, again, you see, as you'll see in the fleet, there are gonna be multiple different like pay scales based on rank and time and service. And so, again, as a midshipman, you're receiving 35% of what an 01 would make immediately after commissioning. Again, what that turns out to for midshipmen roughly in again in this past year was roughly about fourteen hundred dollars. Again, as you know, military pay increases, usually on a yearly basis, they try and increase it and match inflation. That's a whole nother topic that we don't want to get into. If you want to follow me on some of my other accounts, more finance and military related or real estate related, we can go into that on some of those. But again, for this, roughly, again, as we're talking about this, especially going into the year 2026, and you're gonna be expecting to see roughly$1,400 more or less as like your total monthly in amount, so the total amount of entitlement that is coming in. So, what does that look like for midshipmen actually at the end of the month? Right. And what's really interesting is that that the Naval Academy, we'll get kind of into some of the more, you know, deduction topics that come in. But normally at an end of the month, the base amount that a midshipman will receive as a first year, as a plebe, as a fourth class midshipman, you're gonna see$250 a month, which is crazy. If you're a grad listening to that right now and you're like, wait, what? They're making$250 a month as a plebe. Yeah, I feel you. I was like, what the heck? That's crazy. I haven't even gone for what, like seven years now, seven, eight years, and it's already two and a half X. Again, as a plebe, we saw$100,$100,$100 a month. And that was like, that was it,$100 a month. Now the plebs are getting$250 a month, which is really interesting. As you go up to being a third class midshipment, so your second year as a sophomore at the Naval Academy, that amount goes up to$350. And there's actually some caveats and stipulations that we'll talk about later in the episode that could actually bump it up even a little bit more than that. But your base amount will be$350 a month. As you go into your second class year, your junior year at the Naval Academy, you're gonna see$450 plus the caveats. And then in your first class year, you're actually going to like there's not a set amount, you're just gonna receive what your like total amount. There's no gonna be no more withholdings on some of the things that we're gonna talk about. So you just see your full amount every month. And and so that's kind of ranging. And again, with the amount that they're making and how much, again, we'll go into standard monthly deductions, but that might be like a thousand dollars a month, a thousand plus dollars a month that midshipman will see as a firsty, right? Like, that's that's real money, dude. That's real money, a thousand bucks a month as a first class midshipman. That's like that's pretty cool. So, anyway, that's kind of how it'll it'll frame itself. We'll start with like, you know, the very high level there, right? Is they're gonna have a base pay. What that looks like is 250, 350, 450, and then likely cone of your first class year, that may look like a thousand dollars a month at a baseline as a default. But again, obviously it's like, okay, well, if they're if they're technically earning$1,400 a month, why are they only seeing$250 their freshman year,$350 their sophomore year? Which is totally fair. So the first thing that we have to talk about when it comes to money is is the ace. Again, we all we all call it the ace loan. It's technically not a loan. It's a it's like an interest-free, free cash advance that the government gives you for all the stuff that they're gonna issue you, all the gear, all the uniforms, all the different things at the Naval Academy. They just give you that cash advance. They give you a$12,500 cash advance to be able to pay for all of your uniforms and items that are issued to you during plebe summer. So that again, that goes through at that point, that$12,500 right off the bat during plebe summer. And then it's estimated over the time at the Naval Academy, it's estimated that for further gear issues, uniform issues, items throughout, all the stuff that you get provided to you by the Naval Academy, again, uniform clothing-wise, et cetera, that number comes out to an estimated roughly$30,000. And so again, over your time at the Naval Academy, basically you're going to be paying back close to$30,000 worth to what the government is giving you as like advances for the for the items that they're issuing you. Like, oh, here, you're you have to have this. This is this must be yours. You must have it. Oh, by the way, you owe us$30,000 for it. Um, welcome to the military. So, anyway, that kind of runs that down and again. So, you'll hear that term again. You might hear that term a lot. This this idea of the ace loan and this gear payback. And that's exactly what it is. Again, you're just having to pay that back for the fact that it was given to you, so you have all of the items and it's a level playing field coming into the Naval Academy. And again, the way the structures are set up is that everyone will will pay it off, right? Like, there's there's not worry that you're going to be coming out of the Naval Academy in debt or like going through this stuff, right? Everything has been very structured and sound. Where, like, if you're a family, again, just genuinely and honestly, and this isn't any kind of comp, like you're like, I we have no money to be able to contribute to anything like this. Again, like every midshipman is set up for success. Every midshipman in in the process and the program at the Naval Academy is set for the fact that like it'll it'll complete, it'll get taken care of over their four years in Annapolis. And when they graduate in commission, they're ready to go on day one, right? Like, you don't have to worry about anything as a parent, right? And so that's kind of the the big takeaway here is there's absolutely nothing to worry about. All that is already planned into the payment schedules that is like, you know, published. And again, what I will say as we as we kind of stop at this point is I don't know as a parent if you really want to get into the weeds. If you did want to get into the weeds, again, this is where you could research a little bit. So what's really interesting, if you were to Google the midshipman stipend and annual budget book, the midshipman stipended and annual budget book, because this is a government organization, like everything is published, everything is public. You can see everything. So everything that I'm telling you right now, you can actually go into a document and look at it. And and I encourage you to, if you want to, get it, get a sense, like see this stuff in writing, see what the base play looks like, see how this the payment schedules all work out, learn about the ACE load and what they're talking about, the gear issue. And there are literally spreadsheets of every single item that'll get issued, how much it costs, and like how it ends up adding up to and summising to, you know, that total estimated$30,000 amount. So, so yeah, so that's really interesting. Now, to jump into more of like the tactical level side of what a midshipman could be looking at and what they are gonna be looking at during their time in the Navy. And so this is gonna be the term, the the term that we're gonna explain now is L E S. Lima Echo Sierra L E S, which stands for your leave and earnings statement. And this is your pay stub in the military. Every month you're gonna receive your LES. And that LES is gonna tell you basically how much you're receiving in entitlements and how much is coming out as deductions, what your end of month pay is gonna be. And then again, of course, in the military realm, this idea of leave that we talked about is like your PTO, your paid time off, right? So your leave and earnings statement is gonna tell you how much leave you have on the books ready to use, how much you're earning that month, how much again, entitlements, deductions, and then your actual end of month pay and go from there. And again, as a midshipment, you're being issued one of these every single month. And you would log into what is known as my pay. So you can go into log into my pay to access your LES, and you'll be able to see again every entitlement that you have, every deduction that you have. You can see what money is coming in and what money is going out and how it's allocated and how much you are being paid and how much you are paying, right? And I encourage you to do it because again, once you commission, once you actually graduate and you go into the fleet, like you should be looking at that. You should be making sure that your pay is what it's supposed to be. Because guess what? Just like everywhere else in the world, admin messes up sometimes. There are plenty of times where you either make too little or sometimes in a worst case scenario, you make too much and you don't realize you make too much, and then you end up having to pay it back, right? And just a personal experience on this one, because I'm a sucker and I fell for it. When I got out of the service in again, my last day in the Navy was December 22nd, 2022. Starting on December, or excuse me, on January 1st, 2023. Again, and I've been getting out, I had submitted my, you know, my my request to separate from the service like a year before that. Like all this stuff had been approved for months in advance. Like everyone I was getting out, I had my DD214 already in hand before the day even came. Like all this was settled. Guess what? I still received a paycheck on January 1st, 2023. And then again on January 30th, 2020 or 2023. Right. So I received two full paychecks that I shouldn't have received. And again, at that point, it's like an 03. Again, that was like I want to say it was like$15,000, right? It was like$15,000 more or less. That wasn't that much, but it was, it was, it was, again, it was a lot of money. It was like 10, 10 to 15 grand. And uh guess what though? Now, as a result, I I like again, and I forgot about it. I knew in my in my brain of brains, I was like, oh, I'm like, I'm gonna have to pay this back. Like this isn't my money, right? Like I there's like I'm not I'm not in the Navy anymore. And I ended up like again, I set it aside for a while. Like mentally, I knew I was like, okay, like at some point they're gonna send me a request to pay this back, and like here's a link to pay it back. But I didn't, like, I kind of forgot about it. And literally about a couple of months ago, like six or seven months ago, in 2025, I got a letter from the US government that was like, hey, you're indebted like this much amount of money to the government. Like, oh yeah, you're in debt, it's your fault. But it was like, no, you guys just paid me. You guys just paid me when you shouldn't have paid me. And and then again, I ended up, I had to pay it back. And and I knew I was going to have to, but sometimes you forget about it. It's a long way to say, pay attention because sometimes admin messes up, and that may mean you're not getting enough money and you need to advocate for yourself. Because guess what? If the Navy doesn't pay you enough, they're not gonna like on the flip side where it's like they pay you too much, they're gonna recognize it and they're gonna ask for that money back. If they don't pay you enough, guess what? You need to be the person who says something, otherwise, it's just gonna happen, right? Like, I mean, we all understand this concept, right? Like, this isn't anything foreign. You have to be your own advocate. Like, Uncle Sam's gonna get his. This is uh again on too much of a tangent here. Like, he's gonna get his. So, like, when it's is not in your favor, you need to be your biggest advocate to fight for yourself to make sure that things are taken care of. So, anyway, and and rants on that one, but logging into your LES, getting into a habitual, like, you know, again, getting building the habit of checking your LES every single month to make sure that everything is legit and adding up is a good habit to have. So, anyway, we'll kind of pause there. Now, in your LES, you're gonna see a couple of things. You're gonna see your entitlements. So, in your entitlements as a midshipman, you're gonna see your base pay, then you're gonna see your held pay, right? If you're being paid out of your held pay, which we will get to in a little bit of like what that means and how that works, you'll see your base pay. If you're getting paid held pay, you'll see your held pay. And then you may even see comrades, right? So, especially in this December pay stub, when you went on winter leave for two months, you will receive comrades, which is basically like a almost like a daily per diem, like a small amount of food to cover food for like during your travel times when you're in an authorized away from the Naval Academy status. Because again, the Naval Academy King Hall, they provide you food every day. And so when you're not at the Naval Academy, they're actually going to provide you a rate. I think it's like$14 or$15 a day for some food during during your leave period. And so, and when you're in an authorized status on leave away from the Naval Academy campus, you'll receive that comrade. So again, that's not something you'll see in every LES, but especially again, over the summers when you're on leave, during winter break when you're on leave, you may see that comrades come into come into play. All right, and on the flip side of that is we also then have the deductions, like what is actually being paid taken out of your paycheck as a midshipman. And I think this is this one's the really interesting thing because I don't think you fully realize maybe everything that is that you are paying for as a midshipman, right? And so again, if you were to look at the deductions in your LES, you're gonna see that you're paying federal tax, right? There's like a federal income tax withholding, paying a withholding for social security, withholding for Medicare. Again, depending on what state that you're in. So again, this is actually an interesting one too. You know, a lot of times in the military, we're you're gonna hear this term, your state of legal residence. And when it comes to being a midshipment at the Naval Academy, your state of legal residence can be two things. It'll either be one, the state that you declared when you were entering the service. So again, if you're from Texas, Florida, Washington, states with no state income tax, it's gonna be really important that you again claim that the state that you entered the service from is your state of legal residence, because otherwise it's gonna be Maryland. If it's not declared, it's gonna default to Maryland. But you have the ability to declare again the state that you were a part of, and therefore you're not gonna have state income tax, right? Interesting factor there. Again, I am not a legal, I'm not a tax professional and consult your tax professionals. But again, this is something that was really interesting for me because basically what I was able to do in the military, and again, this is a really interesting thing for everyone, is like you're able to establish your state of legal residence in the military. And then when you PCS around, you're able to maintain your like homestead, maintain your residency in the state that you intend to retire in, right? And you know, for me, that was really interesting because my original duty station, I PCS down in Pensacola, Florida for the Cryptologic Warfare Officer Basic Course. And so I made Florida my state of legal residence. Like I went in, there's some administrative forms to do that. We're not gonna have the time on this episode to like talk about how to do that, but it's important to know this term so that way when you do hit the fleet, it's something that you can remember about and ask questions about towards your admin officer in that place to figure it out. Because I claimed that Florida then was my state of legal residence. I got my driver's license in Florida, I registered as a voter in Florida, I was living in Florida, and so I claimed with the Navy as well that Florida is my state of legal residence. And basically, in order for your it to live in it for it to be your state of legal residence, basically you're saying, Hey, I'm here now in the Navy and I intend to retire in this place. Again, things may change, but but you intend to retire in that place. And uh, Florida sounds like a great place. I, you know, Florida sounds like a great state. And so I went ahead and claimed that. And so for my entire time in the military, when I PCS from Florida to Maryland, from Maryland to Connecticut, I was still being taxed as like a Florida individual. And so as a result, I paid no state income tax my entire time in the Navy, right? These are big things that saved me a lot of money over my time in the military. And so these are factors that are really interesting. Again, and as a midshipman, again, consult your tax professional, consult the book, right? Consult the midshipman like budget and stipend book in the dispersing office, because you can go to the dispersing office and talk to them about these things and get things adjusted in your record, right? Again, I'm not here to tell you how to do that. I'm just here to let you know these are things that you consider, questions that you can ask, and this is where you can be inquisitive and trying to save a little money. SGLI. So they are being enrolled, deferred and or like automatically enrolled into a life insurance policy through through the Navy, right? And so that'll basically come out to$31 a month for a$500,000 plan, right? So if they were to pass away in the line of duty at the Naval Academy, basically the SGLI would cover them up to a$500,000 on a$500,000 plan. Nor my life insurance guy, not gonna explain this one in depth, but just know that for$31 a month, you're being deducted$31 a month for a life insurance policy. You'll see, you'll see a line of the deductions called personal deductions. Personal deductions, and you're paying$160 a month for your personal deductions, right?$160 for your personal deductions. And this is where, again, in previous episodes, you may have heard me say this, and this is where I'm really gonna double down. If you are not going to get your hair cut at the barbershop, if you are not going to the tailor to get things perfectly tailored and get them super nice fitting and getting things fixed, if you're not going to the cobbler shop to get your heels, like the actual soles of your shoes repaired every once in a while, or utilizing the dry cleaning and laundry, then you're just wasting money. You are paying$160 a month for the barber shop, for the tailor shop, for the cobbler shop, and for laundry and dry cleaning. Point blade period. Whether you use it or not, you are paying$160 a month for that. You're paying$160 a month. So you might as well use it. And again, shout out to my girl Paula. I I miss ya. I love ya. I I went weekly to get my haircut at the Naval Canopy, weekly to the barber shop to get my haircut. You know, the tailor, I every time I got an uniform, I'd get a tailor to make sure that it looked good. The cobbler shop. I use the cobbler shop a lot. Again, as we all know, military shoes, especially the leathers, you know, there's a term out there. It's called the baits blowout, right? Like the soles of your shoes sometimes they get worn down a lot. You wear your leather shoes, you walk around in your leather shoes so much that you'll see a midshipman's like the soles of their of their shoes, of their leather shoes, they're like an inch thin. Like they've been worn down over the past year and a half. And instead of one dealing with that and the potential like podiatry issues that you may have, right? That's I think that's the feet doctor, right? Like you know, whatever foot issues you may have, just go to the cobbler shop, get them fixed, they will fix them for you. And as my family likes to use this term castile free, it's castile free. Funny little side note. My sister, when she went to high school, she went to like a private, a nice private high school in Northern California. And she would always, she would always come home and be like, oh, mom and dad, like, oh, I love this school. The food is so good, like the lunches are so good, and it's free. Like I get free lunch at Castellan, and it's so good. And my parents are like, Yeah, yeah, yeah, yeah, free. Like, we're paying like way more than we can afford intuition for your free lunch. So whenever we use this term Castellia free, we're talking about the fact that, like, no, you've paid a lot up front. It's only free. Like, you're not paying you're not paying at the point of sale right there. You're not paying when you go to the cobbler shop. So, again, paying 160 bucks a month for it. Please go utilize those services. They're incredible and they can save you from buying a new pair of shoes. If you can just get them fixed, you can just get a new sole on your shoe, do it. Right. And again, I went to the cobbler shop multiple times. They're great. It's quick. You can get it fixed. And then the big ones, dry cleaning and laundry. Right? Like you may want to do your own laundry, like over the weekend, go to your sponsors or whatever. Dry cleaning, you we all know how expensive dry cleaning is. I I barely I barely wear anything that can be dry clean now because I don't want to pay a dry cleaning bill. It's crazy. Again, shout out of a civilian now. I just wear like t-shirts. Aloe, aloe, Lululemon, Viore, like athleisure is my uniform. But again, dry cleaning is the best. And again, you can put into the notes to have your creases put in, right? So not only then do you not have to iron your own creases, but you're delivering them to dry cleaning and they're coming back perfectly creased from the dry cleaning store or shop. It's the best.$160. Pay$160 for it. Use it. All right. Sweet. A boop. Nope.$380 a month.$380 goes back to the ACE repay. So again, we talked about the ACE, ACE loan, the ACE prepayment, your advance for clothing and equipment, your ace, that repay,$380 a month. Right? So for your plebeier, second class year or third class year and second class year,$380 a month getting paid back in order to pay back that advance.$380.$380. About$30 ish doll a month goes to the class fund. And the class fund goes to, you know, things like the lucky bag, activities. If you're a second class midshipman, like your class fund actually goes to helping pay and in and fund the ring dance, right? Super fun. So again, a lot of times, this is another good term, good mix-in of Academy inside here, mandatory fun, right? A lot of times we like to joke in the military, like, you know, we create these like squad morale events. Like you want to build camaraderie and morale. So you like it's supposed to be a quote unquote fun thing, but you make this mandatory event that people don't necessarily want to be at, but you have to go to, but it's supposed to be fun. And this is where the term mando fun comes in, right? Like, oh yeah, a little mandatory fun. Yeah, lovely. Thank gosh, right? But again,$30-ish doll to your class funds, that's gonna go, you know, to a lot of these, you know, midshipman activities. All right. And then$25 a month towards the NAA, the Athletic Association, right? And that's gonna go, again, kind of how they justify it in the document is that's gonna go towards, again, your cost for tickets and admission to the football games, specifically the Army Navy football game, and it goes to help funding some of the lower like revenue sports, some of the lower Yeah, yeah. That's probably just the nicest way to say it, the lowest revenue sports of the Academy to make sure that we're going. Again, if you haven't listened to the episode with the Naval Academy alumni, alumni, the Naval Academy Athletic Director, Mike Kelly, super fun interview, like really great guy. And I mean, shout out to him. What an incredible start to his tenure in Annapolis, he's off to. But we have to look to ways to fund the Naval Academy Athletics program because we have a ton of Division I sports. A ton of Division I sports, and not all of them generate a ton of revenue, right? And so there are a lot of ways that we go to supporting the overall Naval Academy athletic mission, the physical mission of the Naval Academy, and that comes in$25 a month to the NAA. All right. So there you go. You get about$1,400 coming in. Again, you're paying out some of these things,$160 a month personal,$160,$160. Wow,$160 a month personal,$380 to the AC repay, about$30 to the CATS fund,$25 to the NAA,$31 to your SGLI, and then plus like taxes and withholdings. All right. So now some real questions, right? All right, well, we make money. We are active duty navy and we make money. Can I contribute to a retirement plan? Well, that seems like a reasonable question. Can you contribute to the TSP? So if you don't know what the TSP is, the TSP is the Thrift Savings Program, TSP. That is the military's version of the 401k. This is where we go back to the fact that, you know, at the original onset of the episode, I said it's a great, it's a twilight zone. The Naval Academy is always a twilight zone. Yes, you make money. Yes, you may have potentially money left over. No, you are not allowed to contribute to a TSP while you're at the Naval Academy. You're not eligible. You're not eligible for the TSP program. I don't have an answer for you. I don't have an explanation for you. I don't have any kind of expounding upon that besides the fact that like you're not eligible to contribute to the TSP. Even prior enlisted sailors who were contributing to a TSP before they even showed up in Annapolis. They enlisted in the Navy for the first three years they're in the Navy, 18 to 21 years old. They're contributing to their TSP, contributing to their retirement accounts. They show up in Annapolis, nope, not allowed to contribute anymore. Obviously, you don't have to like do anything, it continues to grow. Like it it's still invested in the TSP. They just can't make additional contributions during their time in Annapolis. So no TSP. But what you can do, since you are an adult, you're 18 years old, and you're making money, you can open up an IRA in an individual retirement account. And again, you will never be at as low of a tax rate than you are as a midshipman in the Naval Academy. That's just the facts, right? That's just the facts. So it's a perfect opportunity to open up a Roth IRA and make contributions to your Roth IRA. Again, this isn't going to be a finance lesson necessarily. So, you know, we don't have the time to like break out what, you know, what the difference between Roth and not Roth and all these different things, but just know you are eligible to open an IRA and I encourage you to open an IRA. When I reflect back on my time at the Naval Academy, that is something that I messed up on. That's what I am remiss about. That's what I wish I would have, could have, would have, and could have done better, which was once I took out my career starter loan in my second class year, in my junior year, when I'm about 20 years old, I made my first contribution to an IRA. But I could have been doing that since I was 18 years old, right? And that's one of those things. And this is where, again, not everything in life is completely fair. And I totally, and I totally get it. Again, like some families, you may be able to just like gift your son or daughter$7,500, open up their IRA, and just like max it out for them, right? Like send them that$7,500, then they can put it into their IRA and they're maxing out their IRA from the day that they're 18 years old. If you're a midshipman who doesn't have that kind of family support, totally fair. Again, at that point in time in our lives, my parents, they didn't have$6,000,$6,500 to like just give to me to contribute to my IRA, right? Like that wasn't feasible for us. And so I totally get it if that's you know not something that is available. But for all the midshipmen who are there, while you have everything taken care of, if you have an ability to open up an IRA and start contributing from the time you are 18 years old, that's huge. And like again, the impact that those two years will make 30 years from now, it's actually it's it's huge, dude. It's huge, I promise you. So interesting. You can also open up just like a general brokerage account, a general brokerage investing account and invests, like there's nothing wrong with that, nothing against the rules. Highly encourage it. You know, be proactive about your financial future here. I think it's this really cool aspect of the Naval Academy since you're making money. All right, so that's like retirement accounts and investing. All right, so now let's move on to like scholarships and 529 plans when we're talking about money in the Naval Academy. Specifically because, like, obviously, you haven't like take out this loan. There's$30,000 worth of like expenses that the Naval Academy is issuing to you, right? To take it. Now, are midshipmen eligible for scholarships, grants, and other like monetary contributions? The answer is yes, but there are a lot of stipulations, right? And so we'll start with scholarships, which is there can't be any restrictions on the use of funds for the scholarship, right? If the scholarship has verbiage about the fact that it needs to be used for room or board or tuition or anything like that, no go. Doesn't it it's just not gonna be accepted by the Naval Academy. If there are, if it's contingent upon anything, oh, in order to earn the scholarship, you have to maintain a 3.0 GPA or something gone. Not not working. These have to be non-contingent, non-restrictive scholarships. But if they are, if they're completely like there's there's no restrictions on them, then yes, then they can be, they can be, you know, contributed towards the midshipment at the Naval Academy. And a lot of that will go back towards like again, towards that$30,000 deficit that they may have. And we'll get into like how that actually impacts them in the next couple of minutes. All right. So again, unrestricted scholarships or grants. What about 529 plans? For all my parents out there who, you know, either they were ahead of the game in life, they have been contributing to a 529 plan or an educational educational savings account type situation for their sons and daughters. Can you use that for your midshipmen? No. But yes, but no, in a weird way, right? And so the 529 plan cannot pay the Naval Academy dispersing office directly. It's not going to be accepted, right? And so that piece is really interesting, is you can't like contribute directly from your 529 plan to the Naval Academy. What you can do if you wanted is you can disperse that, like liquidate that from the 529 plan and pay the person directly. So the 529 plan disperses to the midshipman, and then the midshipman makes a personal right, like a personal check, makes a personal payment towards the dispersing office. And so that like distinction is really interesting. Again, I'm not an expert in this. What I would encourage you, if that's something that you feel like if that is relevant to you in your world, you've contributed to a 529 plan, you've contributed to some of these things. I encourage you again, and I can put a link, you know, like in the description and stuff, but you can literally just Google the midshipman stipend and budget book. The midshipman stipend in budget book, there's gonna be contact information for the midshipman dispersing office, or you can just tell your midshipman, and honestly, this is what I encourage, tell your midshipman to go to the midshipman dispersing office, have a conversation with the person in the dispersing office and say, what do I need to do? Right? Because that will kind of go through the process and they will give them the step-by-step direct instructions on how to actually ask execute that. Because yes, you can contribute, again, non-restrictive scholarships and grants or like money from a 529 plan, but again, with the caveat that it gets dispersed to the individual first and then paid by the individual to the dispersing office, right? Because you get up to you get up to$30,000 that can be accepted by the Naval Academy, right? Which kind of directly correlates with the amount of the ACE, the ACE advance payment and the gear issue. You can get up to$30,000 that can be accepted, right? If you do that, like, oh, if I'm a parent and I contribute, you know, that$30,000 or I write a check for$30,000 to the Naval Academy, you know, for my midshipman, does that change their monthly pay? Uh, this goes back to the answer that I just gave you about$529 plans. No, but yes. Um, and so basically what will happen, right, is it's not gonna change the monthly base pay amount, right? And so that first year, that plebe year, they're still gonna see$250 a month, right? That's it. You get$250 a month, held pay's not even in the conversation, right? But into your third class year and into your second class year, this is where it starts to make a difference. Because what will happen is that that deduction, right? Like the amount they are paying towards the ace repay, the amount that is being deducted from them monthly, it goes away, right? So, like no longer do you have$380 being deducted from your pay sheet because it's already been paid. And so that amount will go just back to zero entitlements. And now we're in this situation where like, why don't they see it in their monthly pay? And this is where we get to the conversation of held pay. And so at the Naval Academy, you have this amount that is called held pay. And again, we have the monthly allocation,$250 a month that goes your plebeier for anything that is you so let's consider that almost as a deduction, right? Like the$250 you get paid is like deducted out of the total amount. If there is any leftover, let's say again, after all the deductions, your total entitlement or leftover is like$400, right?$250 goes to you at the end of the month and into your account as end of month pay. And that extra$150 that makes up in total is$400, goes into your held pay account. Right. And the held pay account is designed to have like almost a budget of savings for any future gear issues amount or mandatory payments that'll have to go. Like they hold a certain amount in order to like pay off things as they come, right? And so again, as a third class midshipman and as a uh a second class midshipman, you have a minimum held pay balance that you have to have, right? And so if you have that minimum balance, then again, that then you're good. If you have more than that minimum balance, now we start to get into some of these things, right? Which again, as we talked about, as a when I talked about the pay of like, you know, being a third class and a second class midshipman, like, oh yes, it's 30, 350 with a caveat. Let's say now you have uh again, and these are rough maths. I may be come a little bit off on this. I'm just trying to tell a picture. I'm not saying this is exactly how it's gonna be happening, to be very clear. This is not exactly how it'll go. But just kind of paint the picture. Let's say there's$1,500 in your health pay account, and your minimum health pay amount, like you need in your account, is$1,350, right? If you add$1,500 in there at the end of the month, then the dispersing office can disperse that$150 delta to you as held pay. So then as a third class midshipment, let's say you get your$350 base pay plus that monthly$150 held pay. Now you're at like math.$600,$350 plus$150,$450 carry, no,$500. Wow, bad math. Right? And so you're at that$350 plus$150. You end up, you know, getting at seeing at the end of the month$500, right? And that comes from the hell pay amount. Your hell pay amount basically it'll get paid out on a monthly basis in your third class and second class year in that delta between your minimum held pay amount and how much is in your account up to amount of$250 a month. So it can't be more than$250 a month. So let's say again, you could you somehow you contribute, you get through$30,000 worth of scholarships, or you you know, disperse the$529 plan and write that in, and all$30,000 are paid and there's no more deduction, and you're massively building up your held pay amount or your held pay account. Let's say you have$2,000 in your held pay account and there's$13.50 minimum, you're only gonna see$250 per month, additional as held pay, right? So as a third class midshipment, you have the$350 now plus$250, and now it's actually$600, right? And so again, it goes up to$250. So the max you can get is a$250 monthly held pay amount coming from your health pay account. Where the big difference lies, right? So again, hypothetically, if you are someone who can go ahead and actually execute on that and get that$30,000 to be paid off to your midshipment or whatever the case is, and they and they pay off and they have no ace repayment and all that is taken care of, and their held pay account is building up. You're likely gonna start seeing again instead of$350 a month as a third class, again, you're probably gonna get about$250 a month in held pay almost monthly, kind of going up. So you're gonna see$600 a month and so on and so forth. Where the big payout happens, and this is different, this one's interesting because again, as a midshipman, I remember this one. This one, and again, I could be off because I'm thinking back to like 10 years ago now, right? So, again, as my mom loves to say, never let the truth get in the way of a good story. And that's where we're at right now, because we're not talking about what's going on right now, we're talking about my time. And again, what was going on when I was a midshipman, again, I was getting a hundred bucks a month as a plebe and all this different stuff. I remember basically biannually, like once during winter break, once during summer break, you received a disbursement from your held pay account. And that was always so dope, right? I was like, oh my god, dude. Like when you're a broke 18, 19 year old and you see a little, like a smooth little like 824, a little 824 bones come in over the summer for when you're on your your summer cruise. You kidding, dude? Like, that's good living, right? And so that disbursement happened again. I feel like I could be way wrong, but I feel like that happened basically like once a semester, right? Like once during winter break, once during summer break. And that disbursement was always the best. And everyone was always talking about. I can always think back to my boy Mike Brown. He's like, he would always be like, you know, and and Edilade, and some of my like my guys who I love to death, they'd always be talking like, oh, that helpe, that help pay is juicy, right? Like you were waiting for that held pay, and that help pay would come basically again like once a semester. And uh man, good times. Juicy, juicy, juice. Oh man, good memories, type two fun, type two fun. All right, but what is interesting, okay. So now going back in over all this time, you'll be building up your held pay balance. Your held pay account will just continue to go up, up and up since you're not paying as much deductions, right? It's already been paid off. There is one large payout. Now, how it works is there's one large payout in July going into your first year, right? So you finish second class year, you finish your junior year, you're going into your first class year. So the summer between your junior and senior year, you're gonna get one large held like held pay payout. And your entire held pay balance, your held pay account and balance will be paid out in full in that July. Right? And so again, I'm actually not sure how much that is, but again, if you only max is 250 of the held pay disbursement through your second class and third, third class and second class year, once you hit July, whatever is remaining in that held pay balance will be dispersed to you as that midshipment. And then your first class year, again, you're being paid just the the normal amount, you your entitlement minus your deductions. There's no held pay, like all that kind of goes to the wayside, just entitlement minus deductions, again, which is kindly equated, kind of equated to roughly about a thousand dollars a month now. So wow, this is a fun topic. This is good stuff. And again, I'm not a financial person. This isn't anything. I highly encourage, I'm just doubling down here, just trying to provide context, probably for context and understanding for any like detailed questions, specific questions. One, talk to your kid. And two, talk to the Naval Academy. Just reach out to this person office, right? I'm here to provide context and understanding, not necessarily to tell you exactly how it happened. Or my details might be slightly off. All right, please forgive me. Last one tax. I know this is a big question for families, taxes. I'll start by saying consult your tax professional. Again, I'm not a CPA. I'm not a tax professional. Consult your tax professional when it comes to whether or not you're claiming your midshipment as a dependent. I know there's been a lot of debate, there's been a lot of conversation about whether or not you can claim your plebe as a dependent on your taxes for the year. Again, if they're showing up in late June or July of the year, you know, they've been in your house for six months, you've been taking care of them for six months, why can't you claim them as a dependent? And, you know, the general guidance that I've generally been seeing is that the Naval Academy is actually providing like the majority of the fiscal support and just majority of support for that person for that year. Right? If you're able to figure out a way to show that like you've actually provided more fiscal support than the Naval Academy to your child, then maybe you can claim that it's a dependent. But again, just so you can you know see this in case it wasn't clear when I said it out loud, consult your tax professional. Consult your tax professional. I'm not I'm not giving tax advice, I'm not a tax professional. I'm just letting you know that these are questions that have been had, that these are things, these are things that people discuss and are talking about, and you know, there's some some general stuff. Again, I think in the vast majority of cases, you know, the your plea will need to kind of file their own taxes and you won't be able to claim as a dependent. But if your tax professional is able to, you know, tells you there's no you are you absolutely can claim as a dependent, defer to your tax professional. I'm not a tax professional, just kind of outlying what I see here. So how about that? I think that was a fun episode. Am I right? I think this is good stuff. This is this is fun stuff. You know, I'll just kind of finish off with a with a quick little rant, which is the Naval Academy is one of these places where you have an opportunity. If you are responsible and if you are prudent and wise and disciplined over your time, you have an ability to create a generational changing life opportunity by being a midshipment at the Naval Academy. Your opportunity to start contributing to a Roth IRA from the time you are 18 years old all the way through is incredible. Right? Like it's just like the opportunities are there. Now, I've had this discussion a lot with my right wife recently, again, as we're playing in our life, and all y'all kind of know what's recently happened in our world. Life's not a spreadsheet, right? Life's not a spreadsheet, and you gotta live life and you gotta enjoy life because at any moment that can be taken away. And uh, and I get that. And I resonate with that. And, you know, after everything that went down, I kind of feel that, right? And uh and all that, but it's a long way to say. If you if you take care of what you need to take care of first in the Naval Academy world and you're responsible and you do these things, there's a real possibility where you have a level of wealth that is able to change the trajectory of your family. It's able to make impact on community, right? It's a conversation I, you know, me my wife and I have a lot is you know, I don't want to just be able to take care of my family. I want to be able to make an impact on communities that I really care about, right? Like that's what that's my mission, that's my goal. Like, I really want an opportunity to impact communities that I really care about and that I really love. And that requires capital. That requires, you know, serious movement. And so uh and the Naval Academy's kind of put me on that pathway. And I'm super grateful for it every single day. So, anyway, if you're a parent of a midshipman, I hope this is helpful. If you're a midshipman, I hope this is helpful. If you're a midshipman who has questions about like money in general, again, I'm not a professional, but if you just have questions about what I've done and what insight and perspective I now have and my thoughts on everything, reach out to me. Especially again, where I am a professional is on the real estate side. And if you're thinking about buying or selling a home, please reach out to me. That would mean the world to me. That's helpful. Academy Insider is a nonprofit. For me, this is this is a passion project. I love giving to give back to the Naval Academy community, talk about topics and help midshipment families. Like that is freaking awesome. Um, but if you want to support me and give me the opportunity to do this, again, if you're thinking about buying or selling a home in 2026, please reach out to me. I'd love to help you. That's how I make a living. That's how I support me and my family, you know. And with that, as in 2026, I've, you know, really established and built out my business connecting military families with real estate professionals that I personally trust all across the country, right? So whether you're buying or selling a home in Pensacola, Corpus Christi, you know, San Diego, near Camp Pendleton, up in North County, San Diego, or a ranch in Idaho, right? Like anything, please reach out to me and I'll be sure to kind of be your advocate, guide, and connector in the space. And uh, let's do it. So, anyway, I appreciate it. Thank you everyone for listening. If you have any questions, let me know. Otherwise, I hope you have an incredible rest of your day. Go Navy, beat Army, and uh keep cashing those checks. Heck yeah. Have a good day. Thank you so much for listening to this episode of the Academy Insider Podcast. I really hope you liked it, enjoyed it, and learned something during this time. If you did, please feel free to like and subscribe or leave a comment about the episode. We really appreciate to hear your feedback about everything and continue to make Academy Insider an amazing service that guides, serves, and supports midshipmen, future midshipmen, and their families. Thank you.

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Grant Vermeer

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