Successful Military Retirement: It All Starts With a Plan

Making the move from military to civilian life — and, later, from civilian employment to retirement — required adjustments in every area of my life, from the logistical and personal aspects to financial considerations. Leaving the military, especially, motivated me to set my financial priorities straight. That’s when I started getting serious about saving for retirement. (I wish I’d started sooner, but probably everybody feels that way.)

What I’ve learned along my journey is that setting up a comfortable post-service retirement requires forethought and a solid plan, and it’s best to begin saving and planning before you ever leave the service. If you’re marching this same path (or even looking in that direction), consider the following steps to create a solid military retirement for yourself.

Begin saving as early as you can

If you’re planning to do 20+ years in the military, for your retirement check you’ll get 50 percent of your base pay (at an average of your highest 36 months of pay during active duty) with a 2.5 percent bump for every year you stay beyond that. While this is a great start, if you want to live a life where you can really sit back and enjoy it, you’ll also want to establish a post-retirement investment plan. Here are some tips:

• Establish a diversified investment portfolio. Depending upon your age, you’ll have to decide whether you want to go more conservative or mix in some more aggressive moves. (What’s life without a little risk?)
• Consider investing in the Thrift Savings Plan. The TSP helps military members and federal employees save and make investments in advance of retirement.
• Take advantage of other military savings programs and plans.
• Understand any tax changes that might come your way. There are plenty associated with military retirement.
• Plan to encounter rising Tricare costs. Military health insurance has been changing – and not necessarily for the better, especially for retirees covered by Tricare Prime. Be sure you plan for this potential uncertainty.

The earlier you start building a financial plan for retirement, the better off you’ll be. Keep in mind, the U.S. military is also currently going through a transition where retirement plans are changing to mirror civilian retirement plans, This means that, depending on when you joined the military, you might not receive the traditional 50 percent of your base pay. Make sure you do your research and understand all your financial options, so you can better position yourself to enjoy a happy and healthy financial future.

Plan for your actual separation way ahead of time

Retiring from the military isn’t as easy as collecting a gold watch and a certificate like many people do in civilian life. You have to start planning your separation from service a minimum of a year prior, although the Dept. of Defense recommends starting at least two years out. This way, you give yourself plenty of time to complete all the tasks the military requires you to do. Here’s a head start: 

• Attend pre-separation counseling to help you understand the changes you’ll encounter. You’ll find information about medical coverage, relocation assistance, VA benefits, life insurance, and other important details you’ll need to know once you leave active duty. Many of these programs or benefits will save you money. You can get a jump on this up to 24 months before your retirement date. 
• Get your medical exams completed. You’ll need to complete your final medical and dental exams before you retire. Don’t leave this until the last minute; you need to do it at least 90 days prior, and sometimes scheduling can take a little time. It’s especially important not to delay because after you leave active-duty status, it’ll be harder and more time-consuming to take care of this through the VA.
• Schedule your final move. Chances are, for your last permanent change of station, you’ll either want to go back to your hometown or settle in a state that has military-friendly tax laws. You have one year to decide where you want your final military move to be. Take advantage of the military’s moving benefits while you can.

A well-executed retirement process puts you on the road to a successful transition to civilian life. The better you estimate and assess your logistical financial needs for your retirement years, the better off you’ll be.

Consider whether you’ll work after retirement

One of the important decisions you’ll need to make is whether or not you’ll want to transition into a secondary career. Many retired military members take civilian jobs with the government, work for a government contractor (often with DoD); others want to cut loose from the government altogether and try something new.

For most military retirees, it’s entirely possible to work a civilian job long enough to qualify for a second retirement and collect on that down the road. If you get a government job, you can waive your pension and use your military years as credit towards your government retirement. Combined with a good investment plan, if you take on a second career (not with the government), you can stash away some of the cash you’re making while you collect your military pension. This will give you a great boost toward your second retirement.

Tip: If you’re planning to take on a second career, you’ll definitely want to attend employment workshops held by the Department of Defense Transition Assistance Program (DoD TAP). Civilian jobs aren’t structured like military ones, and the information you learn can be a real eye-opener. Be prepared and take advantage of any programs or benefits offered to you.

Understand your retirement benefits

You’ll also need to understand your retirement benefits, how to collect your pay, how much you’ll get, VA loans for your house, and how your GI bill works. (Depending on which branch you joined, you’ll have up to 10 or 15 years to use it — or, while still in service, you’ll have a limited period of time to transfer your GI Bill to your spouse or dependents). 

You’ll also have to take a look at your Tricare benefits and understand how your medical and dental coverage will work. When navigating retirement benefits, there is a ton of information to absorb, so once you decide to retire, get going on this sooner than later so you don’t miss any important steps.

After living for more than 20 years with the regimented lifestyle a military career dictates, it was a big transition going back to the civilian world. You figure you have to not only re-learn the nuances of civilian life, but you also have to plan for your financial future in a world that is very different from the one you’ve grown accustomed to for the last couple of decades.

But it’s doable: I’m living proof! And I can tell you, if you’re looking to enjoy a successful military retirement, it all starts with a plan (not unlike every other mission you’ve embarked on). A well-executed plan leads to a greater certainty of success — and, once you’ve nailed down all the details, potentially a whole lot of enjoyment.