Life Stages: Retirement Planning
When joining the military, 20 years may sound like a long time. However, all too often, servicemembers fail to maximize the financial opportunities that military retirement planning can provide. It’s not uncommon for 40-year-olds to face their retirement knowing they have plenty of time to do something else in the next stage of their lives. Even those who serve more than 20 years and retire from the military often fail to heed advice about what comes next, and they regret not taking full advantage of the benefits and entitlements that military retirement offers. But when you follow the military retirement guide below, no matter how close you are to retiring — or how far away — you’ll be ready for it.
6 Steps for Military Retirement Planning
1. Pay off your debts.
If you’re carrying credit card or other debt, work to get those balances paid off before you retire. If necessary, consider taking out a consolidation loan or working with a debt consolidation company. For a small monthly fee, they will work with your creditors to lower your interest rates, then you pay them a monthly rate and they take care of your payments for you. Because your rates are lower, you pay less in the long run and pay off your debts faster.
2. Contribute to your Thrift Savings Plan (TSP).
The TSP is a tax-deferred retirement savings plan for federal employees and members of the military, and is considered one of the best retirement savings plans available. TSP matches your contributions of up to 5% of your total salary, plus it pays smaller percentages on additional contributions. It’s a smart and easy way to save for your military retirement, and amplify your impact with “free money” matching contributions from the government.
3. Protect your family with whole life insurance.
If you are young and healthy, whole life insurance may be a smart option for you and your family. Although you likely pay for term life insurance through the military (SGLI), it will end when you leave the service. Whole life insurance will not. Not to mention, unlike term insurance, with whole life insurance, every premium payment builds a cash value that you own, earns interest and can draw on if you need it later in life — like in retirement. Because of this cash value reserve and the fact that it never expires, whole life premiums are higher than term, so it’s best to get a policy as early in life as possible to lock in lower monthly premiums that will never increase — and remember, when you make those premium payments, you’re really paying yourself.
4. Review the Department of Defense Transition Assistance Program (DODTAP) website .
This important resource provides valuable information on transition assistance to prepare you for your military retirement, as well as timelines for when you need to complete certain tasks to ensure your retirement goes smoothly. The DODTAP offers information, tools, and training for both servicemembers and military spouses to ensure your entire family is ready for the next steps after retirement.
5. Update your health and life insurance.
As you prepare to retire from the military, you must decide how to cover your healthcare needs and replace the life insurance you will lose. If you plan to take one of the several TRICARE plan options you will need to enroll yourself and your eligible family members. The same holds true if you want dental and/or vision insurance through the FEDVIP program. Your Servicemembers’ Group Life Insurance plan (SGLI) will only continue for 120 days after your separation. If you plan to apply for Veterans’ Group Life Insurance you must do so within that window. Alternatively, more affordable, high-quality life insurance options designed for Veterans are available from AAFMAA even before you retire. Our life insurance experts can help you determine the best Veterans life insurance policy for you and your needs.
6. Plan your final move.
Servicemembers have a year after retiring from active duty to schedule a final government-paid move to any U.S. location of their choice. The sooner you can schedule your move, the better your chances are of getting your preferred move dates. Depending on how you’ve used your VA Loan benefit, you may qualify for a zero-downpayment, low-interest VA home loan to buy your retirement home.
Planning for Military Retirement Made Easy with AAFMAA
Make your transition from career to retirement as seamless as possible with help from the financial experts at AAFMAA. From life insurance to mortgages to Wealth Management, AAFMAA and it’s subsidiaries can help guide you into the next phase of your life with financial confidence. Call 866-336-3778 to speak with one of our Membership Coordinators today.