Military Retirement and Separation: Your Checklist for Leaving the Military

Preparing to transition out of the military can feel overwhelming, but First Command is here to support you every step of the way. Most of our Advisors are veterans or military spouses who have navigated the same process—giving them firsthand knowledge to help you. This article and comprehensive checklist are designed to simplify your transition by focusing on the key financial decisions you will need to make.

Download the Checklist here

Establish a Transition Fund Prior to Separation or Retirement

Setting aside easily accessible funds for your upcoming transition is a prudent step. One place to stash your transition dollars is in an interest-bearing money market account that is separate from the primary checking account you use to pay your bills. The amount you’ll need depends on a host of factors.

• Will you be embarking on your new career immediately, or do you anticipate a gap between paychecks?
• Do you plan to relocate and buy a new home or stay put?
• Are you planning on going back to school, or will you need special training and certifications to pursue your professional goals?

Once you know the answers to most of these questions, take some time to make a list of your anticipated transition expenses and estimate how much money you will need to cover them. This preparation may reduce stress and better prepare you to handle unanticipated costs without derailing your long-term financial plans. Consider additional resources like the Transition Assistance Programs (TAP) to guide you through your benefits and available opportunities.

Your Military Benefits: How to Extend or Replace Them

During your military service, you’ve had access to robust benefits like the TSP, SGLI, TRICARE, and the Post-9/11 GI Bill. As you prepare for civilian life, planning to extend or replace these benefits is critical to maintaining your family’s future financial security. And if you are retiring from service, you’ll need to carefully consider whether to participate in the Survivor Benefit Plan (SBP).

Thrift Savings Plan (TSP)

The TSP, a retirement savings plan similar to a corporate 401(k), is a valuable tool for building your financial future. Upon separation, you’ll need to decide what to do with the funds you have accumulated in your TSP account. A case can be made for leaving your money in the TSP, which offers a recently expanded set of low-cost investment options. Rolling your funds into an IRA, however, can provide access to a wider range of investment options, such as individual stocks, bonds, and ETFs, allowing for greater customization. Weighing the pros and cons of each option is essential. Consult your financial advisor to determine the best strategy for pursuing your unique retirement goals.

Servicemembers’ Group Life Insurance (SGLI)

As an active-duty service member, you have access to affordable life insurance through SGLI and Family Servicemembers’ Group Life Insurance (FSGLI), which provides coverage for spouses and dependent children. This coverage ends upon separation or retirement, however, making it crucial to plan your next steps.

Replacing your SGLI with Veterans’ Group Life Insurance (VGLI) is a straightforward process, offering up to $500,000 in coverage without a medical exam if you enroll within 240 days of separation. VGLI coverage must be renewed every five years and the cost increases with age, so if you’re seeking permanent coverage, there may be better long-term options. Enrollment closes one year and 120 days after discharge. Learn more about this coverage here.

FSGLI coverage cannot be replaced by VGLI, so you’ll need to consider other options for insuring your spouse or children. Your new employer may offer family coverage. You also have the option of purchasing individual policies.

Private insurance plans may offer more control by allowing you to tailor your coverage to your family’s specific needs. A financial advisor familiar with military benefits can help you explore the best options for replacing SGLI and FSGLI as you seek to protect your family’s financial future.

TRICARE

TRICARE provides comprehensive, no-cost medical coverage while you are on active duty. As you transition, you and your family must take steps to ensure continued healthcare coverage. Here are your key options when you separate:

• Transitional Assistance Management Program (TAMP): Provides 180 days of healthcare coverage after separation, giving you time to plan for long-term options.
• Continued Health Care Benefit Program (CHCBP): This program offers temporary coverage for 18-36 months to bridge gaps in healthcare.
• TRICARE Reserve Select (TRS): Available for eligible reservists and their families at competitive rates.

For retirees, TRICARE offers two main options:

• TRICARE Prime: A low-cost option with network restrictions.
• TRICARE Select: Offers more provider flexibility at slightly higher costs.

To maintain TRICARE eligibility, ensure your Defense Enrollment Eligibility Reporting System (DEERS) information is current. For further details on coverage and eligibility, visit TRICARE’s website.

The Post-9/11 GI Bill

The Post-9/11 GI Bill provides significant financial support for those seeking to further their education, covering tuition and fees, books and supplies, and providing a housing allowance. It can be the key to a successful separation from the military, whether you’re seeking to earn a degree or certification, or train for a new career.

The program covers tuition for in-state public institutions and contributes to private school costs, including a housing stipend and funding for books and supplies. Importantly, the Post-9/11 GI Bill is transferable to eligible family members under specific conditions, offering flexibility to help meet your family’s educational needs. If you haven’t yet used this benefit, now is the time to explore how it can help advance your post-military goals. For more information and detailed guidance, learn more here.

Survivor Benefit Plan (SBP)

SBP can help support your family’s financial security if you pass away in retirement. This optional plan provides up to 55% of your retired pay to your beneficiaries for their lifetime, or until certain eligibility criteria (such as remarriage) change. SBP premiums are deducted directly from your retirement pay, making it a convenient way to help support your family’s future financial security.

While SBP isn’t mandatory, it is a valuable risk management tool that provides guaranteed, inflation-protected lifetime income to your surviving beneficiary. However, the decision about whether to enroll should be based on your family’s unique circumstances, including your spouse's age and income, and the investments and life insurance you have in place.

We Can Help You Take the Next Step

Leaving the military is a major life change, and making informed decisions about extending or replacing your benefits is crucial to securing your family’s financial future. A First Command Financial Advisor can help you navigate this process by providing guidance and tailored strategies not only for replacing your benefits, but for pursuing your unique financial goals as you embark on the next chapter of your life.

TSP funds have very low administrative and investment expenses, and low expenses can have a positive effect on the rate of return of your investment. Prior to requesting a rollover from your Thrift Savings Plan (TSP) account to an Individual Retirement Account (IRA), you should consider whether the rollover is suitable for you. There may be important differences in features, costs, services, withdrawal options and other important aspects between your TSP account and IRA.