Adjusting Your Finances for Transition
You’ve been employed by the same employer, with a steady paycheck, for a long time. That’s about to change. Transitioning from the military to a second career involves the instability of multiple employers and the possibility of unemployment. Financial plan- ning will enhance your chances for success. Consider the following:
• Life insurance. Servicemembers’ Group Life Insurance goes away. If the breadwinner dies, how will the family maintain its financial lifestyle? What are your expens- es now, and what do you expect them to be in the future? Will your family live on investments and sav- ings? Spouse career income? Other family members? Downsizing? Life insurance?
• Retirement accounts. How many accounts will you have? You probably will be changing employers over the years. Have a retirement account to act as your “base camp” to consolidate accounts as employers change. Your Thrift Savings Plan (TSP) can serve this purpose, as can individual retire- ment accounts and future-employer 401(k)s.
• Transition account. Do you have accessible money to tide you over should you find yourself unem- ployed for a period? You should have enough money to cover three to six months of expenses.
• Survivor Benefit Plan. For those retiring from active duty, this is another way to ensure your family carries on if you’re gone, and it’s the only way to
ensure a portion of the retired pay you earned over all those years continues after your death.
• College. Have you transferred your Post-9/11 GI Bill benefits to your spouse or children? Is other funding in place?
• Disability insurance. What if you can’t work due to illness or disability? How will your family get by without your income?
• Taxes. The situation you are leaving is tax-favor- able because only your base pay is taxed. And you probably claimed residency in a low- or no-tax state. Now, every dime you make will be taxed, and you might pay state income tax. Have a tax plan. Retirement accounts offer your best tax advantages, especially employer 401(k)s and TSPs.
• Full retirement. What is your plan to stop working someday? How much will your retirement cost, and what will be your sources of income? Do you have a plan to ensure your expenses in retirement will be minimized? Remember, fewer expenses and less required income leaves more money for fun.
MOAA can help. MOAA Life and Premium mem-
bers can consult, at no charge, with our financial pro- fessionals on financial issues. Email beninfo@moaa .org to get the process started. —Lt. Col. Shane Ostrom, USAF (Ret), CFP®, deputy director, MOAA Transition Center
74 MILITARY OFFICER MAY 2016
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