A lot of changes occur when you leave the military, especially in the area of pay and benefits. You may not have spent a lot of time analyzing your military pay and benefits package, but as you transition out of the military, you'll need to closely examine what you'll be paid in the civilian world and what your benefits will cost. Here are a few points to consider:
Military tax-free allowances like the Basic Allowance for Housing (BAH) or Basic Allowance for Subsistence (BAS) don't exist in the civilian world. Virtually all compensation you'll receive will be taxable. Given this, you might take home a smaller percentage of your civilian pay because some of it will go toward taxes that might not have applied to your military income. As you're comparing military and civilian pay, be sure to understand the tax differences and plan accordingly.
Benefits like health, dental and vision insurance don't come with a big price tag in the military. Sure, you may be forking over co-payments, but there's no monthly premium for the insurance. In the civilian world though, the cost of these benefits can be substantial. Not only will you likely be responsible for co-payments and deductibles, but you'll also have to pay some amount for the coverage. To better understand this impact, be sure to ask prospective employers for a breakdown of total expected costs for a year under their plans.
One civilian benefit isn't available in the military: retirement plan matching contributions. Can you say free money? Though not always offered, some employers will actually match the savings you put into their retirement plans. Some match dollar-for-dollar up to a certain amount. Others only match a percentage.
If a prospective employer offers a match, be sure to include it in your calculation of what you'll be making. Though not part of your take-home pay, it can sometimes be a pretty big benefit and an opportunity you don't want to miss out on.
Of course, there are other elements of civilian pay packages you'll want to consider as well. But, as the previous points illustrate, it's important to look beyond just the monthly or annual salary you might earn in a civilian job. After all, not all paychecks are created equal.
|Personal Finances Retired from Military|
As you probably know, there are a handful of people who write almost exclusively about military families and their money. One of these writers, Rob Aeschbach, is also a Certified Financial Planner™ candidate. I wanted to see what nuggets of wisdom Rob could share, and learn more about how a financial planner can help military […]