Retiring from the Military? 3 Money Moves to Help You Get Started

Guest Post by Jenny Campbell, Member Benefits Team Leader at AAFMAA

For military servicemembers winding down an accomplished career, there are many decisions to address to ensure you and your family are on the right track for post-military life. The financial decisions are among the most complicated and daunting aspects of pre-retirement planning — servicemembers must manage pay and benefits changes and transition from military-specific insurance offerings to civilian and veteran ones. The earlier you begin assessing your finances and planning, the better off you will be, so you can focus on ensuring your family is socially and emotionally prepared for the transition. If you’re unsure where to start when it comes to pre-retirement money moves, these three tips can help. 

1. Protect your family in the long-term with survivor benefits

At retirement, many servicemembers decide to elect the Survivor Benefit Plan (SBP) through their retired pay. How does this work? SBP replaces a veteran’s retired pay when he or she dies, meaning the spouse and/or dependent children will receive a monthly annuity equal to 55 percent of the retired pay. SBP costs the retiree 6.5 percent of their pre-tax retired pay every month. While this is something you hopefully won’t have to worry about for many years after retirement, the best time to have the conversation is prior to leaving the service. If you make an election to decline or reduce SBP at retirement, your spouse’s written approval is required.   

Take a moment to go over a few key questions with your spouse related to SBP. How financially dependent will your spouse be on your retired pay? Will he or she have another source of income (their own pension or retirement savings account, for instance) to draw from? Will the SBP annuity provide enough to keep your spouse and other dependents financially secure for the remainder of their own life or will you need to explore supplemental life insurance plans? 

Lastly, don’t forget to always keep your records up-to-date. This means alerting Defense Finance and Accounting Service (DFAS) promptly of any life changes such as divorce, death or remarriage which may impact your SBP beneficiary. I’ve encountered instances where members remarry and fail to notify DFAS, resulting in their new spouse missing out on SBP benefits. 

2. Research insurance products

I mentioned supplemental life insurancebriefly. As you may know, all servicemembers lose their government-provided Service Group Life Insurance (SGLI) at retirement. There is a replacement option through the VA, Veteran’s Group Life Insurance (VGLI). VGLI does not require proof of medical insurance, making it a good option for retirees who have pre-existing health conditions. 

On the downside, VGLI premiums can increase rapidly with age and are often very expensive when compared to offerings from private and third-party providers. The best way to avoid overpaying or experiencing sticker shock when you see your new premiums is to spend time shopping around for life insurance prior to retirement. Ask for as many quotes as possible and compare plans with your family. Planning ahead means you don’t have to rush into a decision!

You also need to consider health insurance in retirement. TRICARE for Retirees is available through the military and has two options — TRICARE Prime and TRICARE Select. The choice of plan depends on where you will be living in retirement and who you want your providers to be. Again, shopping around for plans and comparing coverage costs is crucial before making a decision. The retirees I talk to find the cost of TRICARE very competitive and, in some cases, lower than many plans available on the private market.

One note: at age 65, a retiree must enroll in Medicare Part B to continue their TRICARE coverage through the TRICARE for Life plan. This plan has no premiums and works as wrap-around coverage after Medicare pays. 

3. Organize your documents and records

Some of the most important records you can prepare ahead of retirement are health records. Be thorough with medical exams before you leave the service and make sure to have any and all ailments or chronic issues documented in your military medical record as service-connected conditions. This applies to even the smallest issues. You might not be planning on filing a VA disability claim right away but, if a condition worsens, you’ll want it in your record so you can establish service connection with the VA. I encounter veterans in their seventies and eighties who are going through the tedious and confusing process of filing a VA claim decades after leaving the military. 

In addition to your health records, you’ll want to gather other important documents pertaining to your military service and estate plan ahead of retirement. Review your estate planning documents to identify any changes that need to be made. You can consult or make an appointment with the JAG office to update legal documents. If you’re considering setting up a trust, consult an estate planning attorney or financial advisor, particularly one with experience dealing with military members and veterans. 

Establish a safe location for your records, preferably one your spouse, executor, and any adult children can access, if needed. A fireproof safe in your home can be a good place. Go through each document with your spouse and any others who may be handling finances in the event of your death to make sure they can identify each item and understand its purpose. For instance, your spouse may need specific military and VA records when applying for survivor benefits. He or she should be able to locate your DD form 214 (certificate of discharge) and be familiar with your VA disability rating, if applicable, as these records can be crucial regarding future military and survivor benefits. 

When you’re planning to retire from the military, there are many decisions that will impact the long-term financial, social, and emotional well-being of your family. Fortunately, by addressing the financial planning tasks early on, you can rest easier and focus on ensuring your family is prepared to make this transition and enjoy post-military civilian life!

Jenny Campbell is the Member Benefits Team Leader at The American Armed Forces Mutual Aid Association, the nation’s longest-standing military financial services not-for-profit organization. 

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