Transitioning from military to civilian life will present you with many exciting opportunities. Congratulations on this next phase of your life!
While you're taking all the necessary steps to make this separation from service as smooth as possible, one key area of change warrants extra scrutiny: your finances. In addition to pay and benefits changes, you may also notice differences in insurance and retirement savings.
Key Considerations
As you make the transition, ask yourself these questions:
Do you have a budget? Money may be tight during this transition. Figure out your expenses and budget your funds accordingly. Keep in mind that you'll now need to figure in costs that you didn't before, such as the full cost of housing (rent or mortgage) as well as life, health and disability insurance.
Have you started looking for a job? Many experts advise starting your employment research a year or more before you leave the service. Check out the Department of Veterans Affairs Veteran Readiness and Employment (VR&E) (formerly known as Vocational Rehabilitation) or find military-friendly employers via nonprofit organizations such as Hire a Hero or Helmets to Hardhats. You may also want to acquire additional job skills through continued education; take advantage of your GI Bill benefits
How are you handling health insurance? The Affordable Care Act (ACA) requires that most Americans carry a minimum level of insurance coverage for them and their dependents or face a penalty come tax time. But, once separated from the military, transitioning servicemembers will no longer be covered by the Tricare health plan, unless they're retiring with 20 years (or more) of service or have received medical retirement.
Employer-supplied insurance is typically the most affordable, but if that's not an option, VA health benefits (including enhanced benefits for certain veterans) are also available. Unfortunately, these typically don't apply to families of veterans. Options for additional coverage include gap insurance coverage through the Transitional Assistance Management Program (TAMP) and the Continued Health Care Benefit Program (CHCBP), as well as insurance via the ACA Health Insurance Marketplace.
What will you do with your retirement funds? During your time in the military, the tax-deferred retirement savings and investment plan, Thrift Savings Plan, is where your nest egg grows. When you leave service, you'll no longer be able to contribute to this account. You have a few options for this account, including:
- Leaving your money where it is
- Rolling over your savings to an employer's plan (you'll need to check with that plan to ensure they accept transfers)
- Rolling over your money into an individual retirement account (IRA)
- Withdrawing the cash value of your account (Note: if done before the age of 59½, you'll be subject to federal income taxes and possibly state taxes, and may face a 10 percent penalty for early withdrawal)
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