Buying uniforms. Making PCS moves. Dealing with deployments. They’re just a few of the many expenses that come with a career in the military that can make it challenging to build up your savings for retirement. However, the sooner you start building your savings, the easier your retirement will be. 

No matter what type of retirement you envision, you must have sufficient funds available to sustain your desired (or actual) lifestyle. The key to achieving your ideal retirement is to start planning and budgeting as early as possible.  

Create Your Retirement Financial Plan 

The main components of a financial plan are your balance sheet, a budget, and your saving and investment goals. 

• Balance Sheet: The balance sheet provides an overview of your financial health at a specific moment. It considers your total assets minus your liabilities to provide your net worth.  
• Budget Plan: Your budget plan will help you manage your money by showing your monthly income, less your expenses. The result of developing and assessing a budget is to determine your available cash flow or the amount of money remaining after your expenses.   
• Savings Goals: Determine what you need to save to fund your retirement, build your emergency savings, and ensure financial security for you and your family. 

How Much Money Will You Need in Retirement? 

To figure out how much money you will need when you retire, you should first consider what it will take to maintain your current lifestyle once you are no longer working. A good place to start is understanding how much you spend in an average year to pay for housing, utilities and maintenance, transport, healthcare, food and any other regular expenses (you can find these on your balance sheet). If you intend to take annual vacations, maintain a budget for special occasions, and have funds available for other extras, you’ll need to include those as well.   

It’s also important to fully understand what your post-military income will be — whether you retire after service or transition to another career. Your post-military income could include your military retirement benefits, VA disability compensation (if applicable), civilian employment income and, in the future, your Social Security benefit, plus income from any investments you’ve made.   

Currently on Active Duty? 

Your active-duty base pay is taxed and your basic allowance for housing and subsistence entitlements are non-taxable income. Once you leave the service, and settle in your new home, take time to understand how different states tax military retirement income, as that could make a significant difference in your budget. Think about what you could adjust when that time comes so you’ll have a plan to compensate or prepare for any big financial changes well in advance. 

To figure out how much you will need to cover at least 20 to 30 years of retirement, take your average annual expenditure and multiply it by your target number of years in retirement. The difference between that number and the amount you currently have available will become your savings goal. Alternatively, you can apply the 4% rule, a withdrawal strategy that suggests you can withdraw 4% of your savings during the first year of your retirement, then adjust for inflation annually. 

Are You in Transition Mode? 

Where you go from here is up to you, whether it’s a new career in the government or civilian space, or if you’re heading into retirement. You’ve still got years ahead of you to make an impact on your financial picture. Whether you feel behind, on-track or ahead with your retirement savings, you’ll want to understand how the changes you’re currently going through will affect your financial situation — not just what you need to live day to day, but in the future. 

Explore our Transition Timeline to plan your next steps and stay on track.

Have You Already Retired? 

Hopefully, you’ve enjoyed having a lot of time not only to create your savings goals, but to watch them grow over time to meet you and your current living expenses where you are now so that you can enjoy the fulfilling life you planned on earlier on in your career. If not, there are still avenues you can take to lead you toward greater wealth. And, of course, you want to protect what you’ve acquired — and what you and your family will need for the years yet to come. 

Set Your Financial Goals and a Timeline  

The younger you are, the longer you have to save, and the more your savings can grow. In other words, the sooner you start, the better. Here are the basic goals to set: 

• Set an annual savings amount: While many financial advisors recommend putting 15% of your gross income into retirement each year, if you have specific retirement goals you may need to increase this amount. As an example, to save $10,000 in one year, you will need to put away about $800 a month.  
• Eliminate Debt: In order to save, it’s important to keep your debts low. You’ll want to pay down any debt (e.g., credit card debt, any loans) you do have to avoid it cutting into your net worth. 
• Build an Emergency Fund: Determine what would be an appropriate emergency fund by ensuring you have enough cash available to cover three to six months’ worth of your non-discretionary (i.e., cost of living) expenses.  

Increase Your Wealth by Investing in the Thrift Savings Plan (TSP) 

The Thrift Savings Plan is one of the best retirement savings programs available exclusively to military members and other federal employees. The New Blended Retirement System (BRS), which combines parts of the legacy retirement system with benefits similar to civilian 401(k) plans, automatically contributes an amount equivalent to 1% of your pay to the TSP, but it will match up to an additional 4% of your pay if you contribute as well. 

Reap the Rewards in the Years to Come 

Building your savings now will pay off in the future. You will have fewer financial worries and you will not be thrown should you have an unexpected expense or an emergency. One of the best ways to ensure you will have what you and your family need no matter which stage of life you are currently in is to protect the wealth you have, and that you plan to have, such as with a right-sized life insurance plan. Look into your options to ensure your savings lead to a bright financial future.