TRANSITION GUIDE 2017 Where Did the
Financial Transition Checklist Life insurance. Servicemember
Group Life Insurance is temporary because it’s based on employ- ment in the service. To protect your family’s financial future in the event of your death, you’ll need life insurance. You should have life insurance that is not based on your employment for two reasons. First, you never know whether a death will occur between jobs; sec- ond, your future employer’s group term life insurance likely will not be substantial enough, as employer group term life insurance typically covers only one to two times the amount of an employee’s salary. Retirement accounts. Sim- plify and consolidate. Just as you have left the service and your Thrift Savings Plan (TSP) be- hind, you also will change future jobs and leave the associated 401(k)s behind. Have a plan to use one retirement account as your “base camp” to consolidate accounts as you change employ- ers. Options include the TSP, an individual retirement account (IRA), or your future employer’s 401(k). You can transfer retire- ment account assets back to your TSP. Learn more at
www.tsp.gov. Transition account. Make sure
you have money to cover living expenses for three to six months. Mortgages, utilities, and grocer- ies don’t wait. Survivor Benefit Plan (SBP). The SBP is the only way to ensure a portion of your retired pay will continue to go to a beneficiary after
72 MILITARY OFFICER MAY 2017
your death. While some people balk at the premium (6.5 percent of retired pay for maximum cover- age), this means you’re paying 6.5 percent to give a beneficiary 55 percent with COLAs through their lifetime. If you have a disabled child, SBP benefits paid to a special needs trust won’t risk other state or federal assistance programs and can provide critical income for your child’s lifetime. College. Have you transferred
Post-9/11 GI Bill benefits to your spouse or your children? Is other funding in place? You can continue to manage Post-9/11 GI Bill monthly benefits among your beneficiaries after you leave the service. Disability insurance. What if
you can’t work due to illness or dis- ability? Corporate jobs don’t tend to pay if you aren’t working. How will your family get by without your in- come? Most jobs provide disability insurance for their employees, but if your employer doesn’t, look into it for your financial security. Taxes. Make sure you have
a tax plan. Besides the home mortgage interest deduction, retirement accounts offer your best tax advantages — especially employer 401(k)s and the TSP. Unlike IRAs, 401(k)s and the TSP don’t have income restric- tions on their tax benefits. Be sure to tell the Defense Finance and Accounting Service how much tax you want withheld from your retired pay for both state and federal taxes.
Servicemembers know a significant portion of their military compensa- tion is tax-exempt, but many do not assess the impact of tax-exempt al- lowances on military take-home pay in relation to potential or expected compensation from their next career. It’s an important step to complete when weighing the con- siderations that accompany transi- tioning from the military. Here are two examples (as
shown in the chart, “Comparing Compensation,” at right) to illus- trate take-home pay considerations compared with a competitive civil- ian salary. The first example is a separating O3 with six years of ser- vice, and the second is a retirement- eligible O5 with 20 years of service. In the National Capital Region (NCR), which comprises Wash- ington, D.C., as well as portions of Maryland and Virginia, these ser- vicemembers bring home $7,769 and $10,410 a month, respectively. If they were both to remain in
the NCR (and were previously resi- dents of a state with no income tax) and able to secure a civilian posi- tion at $125,000 a year, you can see both would most likely earn less than what they earned in uniform. The separating O3 now has to
consider the following items: Q State taxes. They can no longer be a resident of, say, Texas, when out of uniform and living and work-
ing in Virginia. Q Medical and dental insurance. The figures provided in the chart are 2016 average employee premiums for employer-provided coverage.
There is quite a difference. Q Servicemember Group Life Insurance replacement coverage.
ILLUSTRATION: RAZZERS/SHUTTERSTOCK
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92