In the first part of this discussion about financial independence as you prepare to retire, we discussed a financial plan, balance sheet, budget and other considerations. Now let’s look at additional planning and considerations you need to keep in mind to acquire the most secure financially independent future.
Financial Protection
Financial protection is how do you plan for the unexpected: life insurance, savings and your emergency fund, and long-term care insurance. With your military transition, you will lose your Servicemembers’ Group Life Insurance (SGLI) and your Family Servicemembers’ Group Life Insurance (FSGLI) that insures your spouse and children.
There are many companies that offer life insurance, but military organizations such as AAFMAA provide life insurance products and services unique to the military community. They also have professionals you can talk to about your coverage options while serving and as you transition, they will give you free quotes for new policies — or you can use online calculators such as Get a Quote.
Savings and Your Emergency Fund
Your savings goals encompass your emergency fund, retirement account(s), investments, and include your additional financial goals. Saving and investing is the piece of your financial plan that will secure your financial independence in the future.
Consider the Thrift Savings Plan (TSP)
Most servicemembers transitioning out of the military today have been investing in the Thrift Savings Plan — a type of defined contribution plan much like a traditional 401(k) plan for retirement. Once you have left the service, you will no longer be able to make contributions into this plan, although your accrued investment will remain.
You might not know yet what you will be doing after the military, but the TSP is usually the best place to keep the money you’ve put there because the fees are so low. If you continue to work for the federal government in a civilian role, you will have the opportunity to open a new TSP account. If you start a post-military, second career in the private sector, you may be offered a 401(k) plan. Wherever you go next, be sure to know the retirement savings options available to you, including the contribution limits and any employer matches so that you can maximize those contributions.
Seek Financial Guidance
Planning to set aside an emergency fund will enable you to have what you need in a financial emergency so that you do not create a financial problem (credit card debt, loans, etc.) to resolve.
It’s best to seek the guidance of financial professionals like those at AAFMAA Wealth Management & Trust LLC who can evaluate your specific circumstance and help you make the best decision for you.
Protect Your Finances
Finally, you may want to consider factoring expenses for long-term care into your protection plan because if you become chronically ill or unable to care for yourself, the cost for care provided by others is expensive. Unfortunately, the market for long-term care (LTC) insurance has been fraught with turmoil as many private issuers no longer offer LTC Fortunately, some life insurance policies, like AAFMAA’s Value Added Whole Life and Wealth Builder include long-term care settlement options, which enable you to access the death benefit while you’re still alive specifically to defray the costs of long-term care if you ever need it in the future. But unlike long-term care insurance, if you don’t need it, you don’t lose anything, you still have life insurance.
Focus on Your Future
As you begin to plan your military transition, you’ll be given a long list of things to do now, before you leave. Be sure to also look farther ahead to things like your Social Security benefits, your VA Disability Rating, and participation in the Survivor Benefit Plan. Most importantly, be sure you periodically communicate and review the benefits you have earned with your family so that they will know and understand what to expect in the future.
Prepare your estate planning documents while you have easy access to legal assistance on your military installation because paying out of pocket for these documents can be a big expense. AAFMAA Members can also prepare estate documents through our partner AUSA’s Law Assure program. Log into the AAFMAA Member Center account to learn more. Once you have them created, store your estate documents, important military documents like your DD-214, your VA documents and information about your financial and insurance accounts where your family can access them safely and securely in the Digital Vault included with your Membership.
For more information on additional topics to consider in preparing for military retirement, please see the following:
If you have questions about military benefits and entitlements, financial education, and independence before, during or after your military transition, please contact an AAFMAA Member Benefits representative at 800-522-5221, option 2, then option 2 again. Or email [email protected].
When you’re not yet ready to retire, but you are separating from the service, check out our 6 Decisions Before You Separate series for information about choices you’ll need to make.