Well hello, old friends! As you get well into your military career, it’s time to start thinking about where you want to go after you leave the military, and how to be financially prepared for that transition.
This post is part of a series about the best money moves at different stages of your life. Everyone’s personal finance journey is different, but the majority of folks are facing the same issues at roughly the same places in their careers. If you’re at a different place, that’s OK! Don’t feel tied by the ranks listed here – they’re really just for attention. 🙂
Decide If You Need More/Different Life Insurance, And Buy It Now
Servicemember’s Group Life Insurance is affordable coverage while you’re on active duty, but the veteran’s replacement policy, Veterans Group Life Insurance, gets very expensive as you get older. If you are physically qualified for a civilian policy, it will almost be less expensive than SGLI.
On top of the whole “what will I do for life insurance when I leave the military” question, there’s also the issue of coverage. Depending on the rest of your financial picture, SGLI may not be enough coverage for your family’s needs. After considering the other military survivor benefits such as SBP, DIC, and educational benefits, would you need additional coverage to accomplish what you want?
The process to obtain a new life insurance policy can be time-consuming, and prices go up with age, so I recommend that folks start working on these decisions when they have at least five years of military service left. First, you need to determine your needs. Sometimes, this is the hardest part. If you get stuck, it’s worth the price of an hour or two with a fee-only financial planner to look at your options. Once you’ve decided what you need for insurance, start shopping now. You’d be amazed at how long the underwriting process can take, especially if the insurance company is trying to obtain documents from a military treatment facility. (You can imagine, I’m sure.)
Note: I’m assuming that you’re already carrying adequate coverage on your spouse. If you’re not, that’s equally important.
Extra Credit: Start learning about the Survivor Benefit Plan, so that you’re ready to make an informed decision if you retire from the military. There’s a lot to understand, and the way you look at the program will change over time. The people I know who are happiest with their SBP decision are those who were very deliberate about their learning and decision making.
Keep Socking Away Money in Your TSP
The more money you have put away for retirement before you leave the military, the less you’ll have to save after you start the next phase of your life. This gives you more flexibility in your post-military budget, which gives you more choices about work and other activities. It also allows you to take advantage of TSP’s low expenses.
Extra Credit: Continue increasing your contribution with every time-in-grade pay raise, annual cost-of-living adjustment, and promotion. The eventual goal is to be contributing the maximum amount allowable by law.
Figure Out What Education and Training You Want To Get
While it can be hard to find the time, the military and supportive organizations offer a wide variety of education and training programs. Whether you want to beef up your IT skills, start a small business, or do a corporate internship, there’s probably a program for you. Identifying your path early is the best way to make sure it will happen.
This goes for spouses, too. There are so many opportunities to gain skills and credentials!
Extra Credit: Make sure you thoroughly understand the GI Bill and how it works. Make sure you have transferred your GI Bill benefits when you have at least 4 years of service left.
Start Working On Your Post-Military Budgets
This can be hard, but the work is where the benefit happens. Make three different versions of what you think your budget will look like after you leave the military. This will take research: How much will health care cost? What is a reasonable salary for your intended work? How long might it take to find the work you want? Will you need to cut back on expenses or add an income to make things balance? Better to figure these things out now!
Then, use this information to help you refine how much money you need in your transition fund. Figure out how much you need to save each month to have that fund ready when you leave the military. As I’ve said a million times, I’ve never heard anyone complain about having too much money for transition. Worst case scenario, you save too much and then you can use the extra for something fun!
Extra Credit: Start living on your post-military income now. (Unless you have some magical guarantee that you’ll make more then. And if that’s the case, I want to know how.) Take everything above that amount each pay period and add it to your transition fund, various savings accounts, or retirement accounts. It might take some wiggling to adjust, but better to wiggle now while you actually have more income than later when you don’t have that extra income.
Keep Your Fixed Expenses Low
As you start moving towards a big financial change, keep your fixed expenses as low as possible. Strongly consider renting at your next duty station. Pay cash for your cars, or finance as little as possible and pay it off as fast as you can. Avoid locking into an expensive cell phone plan, building up credit card balances, or taking on any other required monthly payments. Living lean gives you options, and options are good!
Extra Credit: If you still have any debt, pay it off. Comparison shop for the best deals on services like cell phones, internet service, and insurance.
What money moves are you making at this point in your life/career? I’d love to hear! Comment, or email me!
Do you want to know more about your military pay and benefits?
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