How to Financially Prepare for Your Transition From The Military to Civilian Life

There are some crucial things that military personnel should prepare for before transitioning back as a civilian.

The first priority needs to be that you are ready financially for this change.

Keep in mind that this move is not just about a different career, but your whole way of life will be different, which may have challenges.

Since the military is set up in a very strict structured manner where the government does it for you or tells you what to do, former service members will have to adapt to being more assertive as a civilian when it comes to their job as well as financial health.

Be sure to have plenty of time to get ready before you are due to leave, as this transition will be stressful already as it is. Also, there will be decisions that will have deadlines to be met when it comes to your finances, such as your military life insurance. You want to make sure you have time to research and decide rationally.

Some advice to help you financially plan your civilian life:

Be sure you have savings. For those that have money saved before separating from service, they will have an easier time transition as they will have something to fall back on if necessary.

If you have not already some so, try to start saving up as soon as possible, the minimum being six months before your discharge date.

Having a significant amount of money can allow you to make different choices, such as continuing your education, relocating to another city or state, or to wait until you find the right job.

Be sure to keep the Montgomery GI Bill in mind. The Bill is an education benefit by the Department of Veterans Affairs that active service members can receive.

Those that were on active duty for a minimum of 90 days after September 10, 2001, can also earn a Post 9-11 GI Bill. There is also a Montgomery GI Bill Selected Reserve for those actively in the reserves that have a contract of 6 years.

The GI Bill can assist with paying educational expenses for those that wish to continue their education.

Military members can enroll while serving and can receive up to 3 years of benefits from the GI Bill once they are discharged. The education benefit is calculated on the length of time served.

For instance, a former Marine that served for a minimum of 3 years will be eligible to receive $2,050 monthly with the Montgomery GI Bill if they go back to school.

All in-state public college tuitions and fees are covered under the Post 9-11 GI Bill for those that at least served three years. Those in a school that is private or in a different country can have up to $24,476.79 covered annually.

Those that served less than three years are calculated differently.

Another thing you want to ensure is to save for retirement. Once you leave the service, you will need to figure out how to save up money for when you retire. This can entail contributing money into a retirement savings program offered at your new job, or opening up your own individual IRA or Roth.

You also need to make a choice on what you want to do with your military retirement savings.

For those that have less than 13 years of military service are under the Blended Retirement System, which is a combination of a traditional pension and a defined contribution plan called the Thrift Savings Plan (TSP).

Those that have less than 12 years under their belt were given a choice to move into the BRS on January 1 in 2018 rather than staying with the previous pension plan, which is only given to those that have at least served for 20 years.

Those under the Blended Retirement System are allowed to leave their money in their TSP or have the funds rolled into an IRA or 401(k) plan.

This decision should be based on what will be best for you. The TSP is cost affordable with low fees and is quite basic when it comes to options for investing.

For those that prefer low costs and keeping things simple, the TSP may be a good fit for you. Just open a new IRA for your new career.

Those that want all their savings in one place for easier bookkeeping, you can roll your TSP balance into your new qualified IRA. However, be sure to do your research on fees and the investment options offered to ensure you are making the right decision.

Now another financial aspect you need to strategize for is your health care.

Those that retire with at least 20 years of service can receive insurance through Tricare, the same program while under active duty. For any health conditions caused by your time in service, you may be qualified to get coverage under the Veteran Affairs program.

Those that do not meet the above will eventually have to get non-military healthcare.

However, you may want to at least extend your active-duty plan through the Continued Health Care Benefit Program, so that you will have time to research and shop around or give you time until you get coverage through your new job.

The extension gives you coverage for an additional 18 to 36 months after separation.

Also, at that time, be sure to learn about what you will need to pay for your future health care because copays, deductibles, and coverage limits do not exist under military coverage. But that is a different story when it comes to a civilian health plan.

Taxes are another expense you will need to be prepared for as it is usually quite heftier than when in service. This is because there are different tax benefits while serving, such as exemptions for housing and no taxes for deployment pay while in combat zones.

If you take a job that has the same pay rate as when you were in the military, you could take home less in your new career.

If you are starting a job that is in the same pay rate, you will need to make adjustments in your budget due to bringing home earnings.

Lastly, you will need to think about life insurance. You can only have your current military insurance for 120 days after your discharge.

If you wish to continue your policy, you can convert it to the Veterans Group Life Insurance from the Servicemembers Group Life Insurance. You do not need to submit a physical or prove that you are in good health to do this conversion.

You also have the choice to take out a term life insurance policy, which is only covered for a specified timeframe.

If you have a family that is dependent on you, you will want to ensure that you have some life insurance. If you do not, this may be an unneeded expense.