Members of the U.S. military serve in different branches in locations across the country and around the world. The various branches within DOD include the Department of the Air Force, the Department of the Army, and Department of the Navy, which also incorporates forces of the Marine Corps. DOD also oversees the members of the Coast Guard along with the Department of Transportation. As of 2004, approximately 1.4 million active duty military personnel served in the various branches in more than 6,000 locations. In addition, 2 million retirees receive pay and benefits from the department. DOD is also the largest employer and trainer of young adults in the United States, recruiting about 200,000 individuals into active duty in 2004—the majority of them recent high school graduates. As shown in figure 1, the pay of typical junior enlisted staff—grades E-1 through E-3— ranges between $1,143 and $1,641 per month. Entry-level military personnel are generally young and have limited education and incomes. A 2002 private research organization report that examined the financial situation of military members noted that the military hires primarily young, untrained, entry-level employees. Comparing data from various surveys done of large numbers of civilians and military members, this report found that less than 5 percent of junior enlisted personnel held bachelor’s degrees compared to 27 percent of the civilians. In terms of income, this report found that 87 percent of junior enlisted personnel had total monthly family incomes of $3,000 or less. However, a DOD commission that reviews military compensation has found that military members are paid at the 70th percentile or higher of comparably educated civilians. In addition, military members receive housing and subsistence benefits, with about half living in on-base housing and many having access to military facilities that provide meals. Various aspects of the military life can increase the challenges that service members face in managing their finances. According to the private research report, factors that appeared to increase the financial distress among military members were the family separations resulting from changes in duty stations and deployments away from home. According to our report on military relocations, DOD reported that about one-third of all military members make Permanent Change of Station (PCS) moves every year. The average length of time spent at each location can also be brief, with 20 percent of such relocations lasting less than 1 year and about 50 percent lasting 2 years or less. Leaving or retiring from the service also represents the last major transition in a service member’s career, with data indicating that most enlisted personnel leave after their initial duty commitment. As with their civilian counterparts, military service members may be offered various types of financial products, including life insurance. Types of life insurance commonly sold include term, whole, universal, and variable life insurance products. Many companies offer term life insurance, which generally provides basic death benefits for a specified time period, such as 10 or 20 years. At the end of this term, the insured can usually renew the coverage at a higher premium rate for another set term period. The coverage on a term policy may also end if the insured person ceases making the required periodic premium payments. Under a whole life policy, an insured person can make level premium payments, which will provide the specified amount of death benefits. Because the premium generally stays the same throughout the time that the policy is in force, premiums for whole life insurance are generally higher initially than for comparable amounts of term life coverage. Whole life insurance policies can build cash value, which can be borrowed upon, though this will reduce death benefits until the loan is repaid in full. Some whole life policies are known as “modified whole life insurance” in which the policyowner pays a lower than normal premium for a specified initial period, such as 5 years, after which time the premium increases to a higher amount that is payable for the life of the policy. Universal life products may also provide permanent insurance—like a whole life policy—but may also offer their purchasers more flexibility. Under such policies, the holder can vary the amount of the premium to build up the cash value of the policy by increasing the amount of the payment, or can pay less into the policy at other times, when money is needed for other purposes. Similarly, under a variable life policy, a cash value accumulates that can be used to invest in various instruments, such as common stocks, bonds, or mutual fund investments. However, with a variable life policy, the policyholder (and not the company) assumes the investment risk tied to the product. If these investments perform well, the death benefits paid on the policy can increase; conversely, if the investments perform poorly, the purchaser may have to increase their premiums to keep the policy in force. The federal government offers service members life insurance as part of their total benefits package. Each member is eligible for inexpensive coverage under Servicemembers’ Group Life Insurance (SGLI), which provides group term life insurance. Until September 1, 2005, service members were automatically covered for the maximum amount of $250,000 of insurance on their first day of active duty status, unless they decline or reduce their coverage, but Congress has now increased this amount to $400,000. Service members leaving the military can also opt to continue coverage through the government-sponsored coverage provided to veterans. Although many life insurance policies exclude coverage for deaths resulting from acts of war, these government-sponsored policies do not contain this exclusion. State government entities are the primary regulators of insurance companies and agents in the United States. When first establishing operations, an insurance company must obtain a charter or license in order to write business in a state. This state becomes its state of domicile. Insurers may obtain approval to market products in multiple states, and therefore the sales by insurers can be overseen by multiple state regulators, though financial solvency of each company is primarily overseen by the regulator in the company’s state of domicile. Some insurance companies market their products using their own proprietary sales force. Some companies may also use agents employed by independent firms who may be marketing the products of multiple companies to their customers. The state insurance regulators oversee the insurance companies and agents that do business in their jurisdictions in several ways, including reviewing and approving products for sale and examining the operations of companies to ensure their financial soundness or proper market conduct behavior. Although each state has its own insurance regulator and laws, the National Association of Insurance Commissioners (NAIC) provides a national forum for addressing and resolving major insurance issues and for allowing regulators to develop consistent policies on the regulation of insurance when consistency is deemed appropriate. This association consists of the heads of each state insurance department, the District of Columbia, and four U.S. territories. It serves as a clearinghouse for exchanging information and provides a structure for interstate cooperation for examinations of multistate insurers. NAIC staff also coordinate the development of model insurance laws and regulations for consideration by states. Its staff also review state insurance departments’ regulatory activities as part of its national financial accreditation program. To meet their financial investment needs, military members may also be offered various securities products. These can include stocks issued by public companies that are traded in various markets, or debt securities, such as bonds that provide interest income to their holders. A common securities product that many investors purchase is a mutual fund. Mutual funds are investment companies that pool the money of many investors, and then invest them in other assets, such as stocks or bonds. By holding the shares of the mutual fund, investors can benefit from owning a broad portfolio of diversified securities managed by professional money managers, whose services they might otherwise be unable to obtain or afford. Investors are charged mutual fund fees, which cover the day-to-day costs of running a fund. Mutual funds are sold through a variety of distribution channels. For instance, investors can buy them directly by telephone or mail, or they can be sold by sales forces, such as the account representatives of third party broker-dealers. Some mutual funds assess sales charges (also called “loads”), which are generally paid at the time of purchase to compensate these sales personnel. Securities—and the firms that market them—are overseen by various regulators. At the federal level, the Securities and Exchange Commission (SEC) oversees securities issued by public companies. The firms that market securities to investors, known as broker-dealers, must also register and subject themselves to SEC oversight. This includes complying with various requirements for regulatory reporting, financial soundness, and sales practice regulations designed to protect investors. In addition to oversight by SEC, broker-dealers also are overseen by private entities known as self-regulatory organizations. The New York Stock Exchange and NASD (formerly called the National Association of Securities Dealers) are two examples of such organizations. State regulators also oversee securities activities. Congressional concerns over the adequacy of military member’s financial literacy and the processes in place to address financial product sales have prompted recent reviews and legislative actions. In response to a Congressional committee’s request to review military members’ financial condition, we recently reviewed and reported on the financial condition of active duty service members and their families. We also reported on DOD’s efforts to evaluate programs to assist deployed and non-deployed service members in managing their personal finances and the extent to which junior enlisted members received required personal financial management training. As part of this study, we found that the financial conditions of deployed and non-deployed service members and their families are similar, but deployed service members and their families may face additional financial problems related to pay. We also found that DOD lacks an oversight framework for evaluating the effectiveness of its personal financial management training programs across services, and that some junior enlisted service members were not receiving personal financial management training required by service regulations.