Retirement Planning: What do Military Families Need to Know?
About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C., area that works with clients virtually across the country. Lamar's work with his clients starts with a focus on budgeting, insurance, optimizing employee benefits, investing, and retirement planning. Dream Financial Planning is a Fiduciary Financial Planning firm specifically designed to help individuals in their 30s and 40s take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
Retirement is an exciting life milestone that requires careful planning and budgeting. For military families, it requires even more knowledge, because you need to ensure that you meet all the military's qualifications and that you are taking full advantage of any veterans benefits coming your way.
To celebrate National Veteran and Military Family Month, in November, let's look at what military families need to know when approaching retirement planning, including how to make the most out of your benefits and how to live a comfortable civilian life.
Transition Assistance Program
The first thing to know when retiring from the military is that you will likely need to go through the Transition Assistance Program or TAP. TAP is a program that provides information, tools, and training to make your retirement as seamless as possible. Some of these training resources are optional, but some are mandatory before leaving the military.1
In the mandatory requirements, you may need to:
- Complete an individualized initial counseling session
- Complete the pre-separation counseling brief
- Attend a mandatory briefing on transition preparation and your benefits
- Have a final medical exam
- Schedule your final move1
These requirements may be based on your individual circumstances, and each branch of the military has its own specific information. Check out the TAP website to find out everything you need to know.1
Post-Retirement Income
The most important part of retirement planning for anyone, including veterans and their families, is income planning. The goal of retirement-income planning is to have enough money to last through your retirement years. To do this, you need to understand your income sources and establish a budget accordingly.
There are a few different retirement pay options for military members and their families.
For service members with an entry date prior to September 8, 1980, you will receive a final basic pay. This is a defined benefit that equals “2.5% times the number of years of service times the member's final basic pay on the day of retirement.”2
For service members with an entry date between Sept. 8, 1980, and July 31, 1986, you will receive “High 36,” which is a “defined benefit that equals 2.5% times the number of years of service times the average of the member's highest 36 months of basic pay.” This retirement pay is also applicable to service members with entry dates after Aug. 1, 1986, and before Jan. 1, 2018, who did not choose REDUX or opt into the Blended Retirement System.2
Lastly, the military offers the Blended Retirement System. More than half a million service members are covered by the BRS. This system combines elements of the legacy retirement system with benefits similar to those offered in many civilian 401(k) plans.2
As you build your post-retirement budget, it's important to know how much money you will be earning in retirement. In addition to the plans listed above, military families should consider taxes, annual adjustments, and Social Security benefits.
Insurance Planning
Medical expenses are a huge consideration in retirement. Luckily, as a veteran, you have access to insurance plans for yourself and your family.
The main one is TRICARE, but you must enroll yourself and eligible family members, so you don't lose these benefits. The TRICARE website has a lot of good information, including how to enroll and your health plan options. You must enroll in a TRICARE plan within 90 days of retirement.3
In addition to TRICARE, you may need to enroll in dental and vision insurance. You can do this through the Federal Employee Dental and Vision Insurance Program (FEDVIP). FEDVIP is a voluntary program that allows you to choose from among 12 dental carriers and 5 vision carriers. How much you pay for these programs will depend on which ones you choose.3
As we celebrate National Veteran and Military Families Month and recognize all the hard work and sacrifice of our military members, we want to share as much information as possible so you can retire with ease.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. So if you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
Complimentary Consultation
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
Monthly Newsletter
In the June Newsletter, I provide a market update and a PDF guide with tips to help you handle inflation. I also shared a CNN article where I shared my thoughts on Crypto and NFTs, 5 savings mistakes people make when building their financial life. If you find any of this information helpful, feel free to sign up to receive future e-mail updates. If you find any of this information helpful, feel free to sign up to receive future newsletters via e-mail.
SIGN UP TO RECEIVE OUR MONTHLY NEWSLETTER BY E-MAIL
Important Numbers For 2022
Your company offers a 401k. Now what?
What Is My Tax Bracket for the 2022 Tax Year?
"You're a CFP® professional, Great what's a CFP®?"
Your 2022 Tax Filing Season To-Do List
6 Common Financial Stress Triggers and How to Overcome Them
Disclaimer: Dream Financial Planning, LLC does not warrant that this information will be free from error. None of the information provided on this website is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. Under no circumstances shall Dream Financial Planning, LLC be liable for any direct, indirect, special, or consequential damages that result from the use of, or the inability to use, the materials in this site, even if Dream Financial Planning, LLC or a Dream Financial Planning, LLC authorized representative has been advised of the possibility of such damages. Please consult with your own advisor before making any changes to your Financial Plan, Investments, or Insurance coverage.
