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June 28, 2017 - Address These Key Financial Items When Retiring From Military

| June 28, 2017
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A seasoned military career brings a unique professional experience for millions of people each year. We have roughly 1.3 million active-duty military service members.1 And at least 1.47 million non-disability military retirees receive retirement payments after leaving the military.2 As this specific demographic prepares to retire and return to a civilian life, their financial life also uniquely changes. They will lose a variety of military perks and experience often unexpected living costs, creating unique financial needs to address.

If you or someone you know will soon retire from the military, here are 4 financial details to manage in order to support a stable transition.

1. Know your budget.

Once you retire, you no longer receive the stable military salary you’re used to, among other perks. As such, identifying your costs of living as a civilian is essential. Details like car expenses, rent or mortgage checks, schooling, or even clothing expenses add up quickly. Further, you need to identify how much retirement savings you have to support you. While military service members have access to unique savings opportunities and military pensions, a vast majority don’t qualify or take advantage of them. In fact, less than 18% of service members enlist long enough in the military to qualify for retirement savings.3 As a result, identifying your savings gap against your living expenses is an essential planning step.

2. Understand how taxes will affect you.

If you’re one of the near 18% of service members retiring with a pension, then you have specific tax details to navigate. Tax liabilities on retirement payments differ depending on what state you live in. In addition, the tax environment on other details such as income, Social Security, and property also vary. As you plan your military retirement and move, be sure to take into account the tax environment for your future city and state.4

3. Cover your life insurance gap.

When on active duty, service members and their spouses have access to the military’s unique life insurance program. But once retired from the military, this perk disappears. Retiring service members can enroll in the Veterans’ Group Life Insurance with no medical underwriting, if they do so within 120 days of leaving active service. However, the cost-prohibitive coverage generally is best for a small niche of veterans with deeper health issues. As a result, finding adequate commercial life insurance coverage is usually important to help cover protection gaps.5

4. Be sure you understand your specific military retirement benefits.

Service members who enlist long enough to qualify for the military’s pension (20 years) will have helpful income once they retire. But, the date you enrolled in the military will dictate what specific retirement benefits you’ll receive. Service members who entered the military:

  • Before September 1980: Are eligible for the military’s Final Pay retirement system
  • Between September 8, 1980 and August 1986: Can receive the High 36 system
  • After August 1986: Are eligible for the REDUX system

More fully understanding which system you qualify for and how it pays out is essential to your financial life.6

No matter when you plan to retire, the annual expenses and income you have will define the specific financial strategies you need. To explore how retiring from the military could affect you or a loved one, feel free to contact us today. We’re ready to help you make the most of your financial opportunities.


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  1. http://www.militarytimes.com
  2. http://actuary.defense.gov
  3. http://www.kiplinger.com
  4. http://www.kiplinger.com
  5. http://www.military.com
  6. http://www.military.com
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