Military life provides a mix of routine and adventure. What becomes evident as you look at the financial elements of transitioning out of the military is that there’s a lot of good that you’re leaving behind and will need to replace in civilian life.
This week, I’ll continue my two-part look at finances and the move from the military.
Expectations: You’ll have to recreate your benefits package. Depending when you leave the military, this may be a smaller or bigger task. For example, if you’re retiring, you’ll have TRICARE; if not, you’ll enter the civilian health care fray. Depending on your situation, you may have to replace SGLI with life insurance from a commercial company or your new employer. The military’s disability system may need to be turned into disability insurance outside of the military.
Execution: A basic rule of thumb is to ensure that your insurance coverage keeps pace with you as your life changes. Leaving the military has the potential to open more than a few gaps in your protection plan. Consider the various types of insurance as you compare and consider job opportunities. Begin to look at replacing SGLI months before you leave the service. VGLI is a fallback, but in certain circumstances it can be substantially more expensive than other options. If you’re retiring, you and your spouse will need to make an informed decision regarding the military’s Survivor Benefit Plan. Don’t shortchange this one, SBP provides big protection. You want to make a decision that’s right for your situation.
Expectations: Over the last 30 years, the number of civilian corporations offering military-like pension plans has shrunk dramatically. Unless you’re planning on moving into a government job or professions such as teaching, you’ll need to be prepared to do much of the heavy lifting when it comes to retirement. That means save, save, save.
Execution: If you’re going to receive a monthly military retirement check, make it an engine to help you pay down debt, save for your next retirement or other goals. In other words, build on it, don’t just use it as income to expand your lifestyle. In the civilian workplace, a 401(k) is your go-to retirement vehicle. Today, many employers offer Roth and traditional options, matching contributions and periodic profit-sharing contributions. Bone up and take advantage of your options. It’s a great time to sit down with a financial planner or take advantage of online tools to see what you need to do to meet your long-term retirement goals.
Expectations: Have you thought about continuing to serve in the Guard or Reserve? Beyond the camaraderie and network of those with familiar backgrounds and experiences, there are some substantial financial benefits to continued service. First, at the most basic level you’ll have the opportunity to earn monthly income through weekend drills and annual training. On the insurance front, you’ll have continued access to SGLI and the opportunity to take advantage of the fantastic value of TRICARE Reserve Select. It’s hard to find family health coverage for the $217.51/month this program offers. Finally, each year of service on active duty count towards your retirement from the Guard or Reserve. Normally available at age 60, this retirement comes with the same health care active-duty retirees receive and a monthly inflation-adjusted stream of income.
Execution: If you’re not retiring, consider a move to the Guard or Reserve.
Expectations: Several other benefits or opportunities could end when you leave the military. Last week while at the dentist’s office I was staring at my X-rays and was reminded of one of my last stops when I left the military: the dentist for a couple of root canals.
Execution: Whether it’s rolling through legal assistance to update your wills and powers of attorney or leveraging the Transition GPS program, make the most of all you can while you can.
In the end, transition is a beginning and not an end. Spend time mapping out your plans and making the preparations before you launch your future.