Retirement Planning: What do Military Families Need to Know?
Retirement is an exciting chapter in life, but it demands thorough planning and budgeting. Military families, in particular, face additional considerations as they must navigate military qualifications and harness available veterans' benefits to the fullest.
As we celebrate National Veteran and Military Family Month in November, let's delve into what military families should understand about retirement planning. This includes optimizing benefits and ensuring a smooth transition to civilian life for a comfortable retirement.
Transition Assistance Program
When you're getting ready to retire from the military, the first important step is to understand the Transition Assistance Program, known as TAP. This program offers valuable information, tools, and training to help make your transition into retirement as smooth as can be. While some of these training resources are optional, it's important to realize that some are mandatory before you leave the military.1
In the mandatory requirements, you may need to:
- Complete an individualized initial counseling session
- Complete the pre-separation counseling brief
- Attend a mandatory briefing on transition preparation and your benefits
- Have a final medical exam
- Schedule your final move1
These requirements may be based on your individual circumstances, and each branch of the military has its own specific information. Check out the TAP website to find out everything you need to know.1
Post-Retirement Income
The key to preparing for retirement, whether you're a veteran or not, is making sure you have enough money to cover your expenses during your retirement years. This means knowing where your income is coming from and creating a budget that fits your needs. Military personnel and their families have various retirement pay options to consider.
For service members with an entry date prior to September 8, 1980, you will receive a final basic pay. This is a defined benefit that equals “2.5% times the number of years of service times the member's final basic pay on the day of retirement.”2
For service members with an entry date between Sept. 8, 1980, and July 31, 1986, you will receive “High-36,” which is a “defined benefit that equals 2.5% times the number of years of service times the average of the member's highest 36 months of basic pay.” This retirement pay is also applicable to service members with entry dates after Aug. 1, 1986, and before Jan. 1, 2018, who did not choose REDUX or opt into the Blended Retirement System.2
Lastly, the military offers the Blended Retirement System. This system combines elements of the legacy retirement system with benefits similar to those offered in many civilian 401(k) plans.2
As you build your post-retirement budget, it's important to know how much money you will be earning in retirement. In addition to the plans listed above, military families should consider taxes, annual adjustments, and Social Security benefits.
Insurance Planning
Medical expenses are a huge consideration in retirement. Luckily, as a veteran, you have access to insurance plans for yourself and your family.
The main one is TRICARE, but you must enroll yourself and eligible family members so you don't lose these benefits. The TRICARE website has a lot of good information, including how to enroll and your health plan options. You must enroll in a TRICARE plan within 90 days of retirement.3
In addition to TRICARE, you may need to enroll in dental and vision insurance. You can do this through the Federal Employee Dental and Vision Insurance Program (FEDVIP). FEDVIP is a voluntary program that allows you to choose from among 12 dental carriers and 5 vision carriers. How much you pay for these programs will depend on which ones you choose.4
As we celebrate National Veteran and Military Families Month and recognize all the hard work and sacrifice of our military members, we want to share as much information as possible so you can retire with ease.