Military Retirement Planning: Financial Tips & Considerations

When you join the military and you know retirement requires 20 years of service, that goal can seem a long way off. However, all too often, servicemembers fail to maximize the financial opportunities that military retirement planning can provide.

It’s not uncommon for servicemembers to approach their retirement from Active Duty in early middle-age with the perspective that they have plenty of time to do something else in the next chapter of their lives.

Even some of those who serve more than 20 years and retire from the military often fail to take full advantage of the benefits and entitlements that military retirement offers. Fortunately, the military retirement guide below provides step by step guidance that can help you be ready for it — no matter how close or how far away you are from retiring.

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, debt consolidation companies 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 will pay less in the long run and settle your debts faster.

2. Contribute to Your Thrift Savings Plan (TSP)

Considered to be one of the best retirement savings plans available, the TSP offers both a Roth and/or a tax-deferred retirement savings plan for federal employees and members of the military.

To participate in TSP, you must have elected a minimum of 1% of your basic pay and then TSP matches your contributions of up to 5% of your total salary if you are a servicemember taking part in the Blended Retirement System who entered service after 2018, but that does not limit your own contributions. (If you entered service prior to 2018 you are a Legacy participant and can contribute to TSP, but you do not receive the up to 5% service component match.) It’s a smart and easy way to save for your future after military retirement, and it amplifies your financial impact with “free money” matching contributions from the government.

3. Protect Your Family with Whole Life Insurance

Whole life insurance is a smart option for most families. 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.

Unlike term insurance, with whole life insurance every premium payment supports the death benefit and builds a cash value that belongs to the owner, earns interest, and can be available for a loan or withdrawal against your cash value, providing your cash value has increased. Because of this cash value and the lifetime of coverage, whole life premiums are higher than term per dollar of coverage. So, the sooner you get a policy the better — allowing you to lock in lower monthly premiums that will never increase. Remember, when you make those premium payments, you’re really paying yourself. 

4. Visit the Department of Defense Transition Assistance Program’s Website

The Department of Defense Transition Assistance Program (DODTAP) website is an important resource that provides valuable information on transition assistance to prepare you for your military retirement. On it, you will also find 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 Servicemembers’ Group Life Insurance (SGLI) you will lose; it will only continue for 120 days after your separation.

If you plan to apply for Veterans’ Group Life Insurance (VGLI) you must do so within that same time 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 family.

On the healthcare front, 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.

6. Plan Your Final Move

Servicemembers have up to one 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 our subsidiaries can help guide you into the next phase of your life with financial confidence.

For guidance on this and other decisions you’ll need to make before retirement, get a free Transition Timeline guide today. If you’re ready to replace your SGLI, call 866-528-2358 or contact us online to speak with one of our Membership Coordinators about your options today.