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Making the Most of Military Benefits in Retirement

Retired couple dancing.

Retirement is a significant milestone in anyone's life, and for military Veterans it comes with a unique set of benefits and challenges. Understanding and maximizing your military retirement benefits can make a substantial difference in your post-service life. Get help navigating your transition from the military financial professionals of AAFMAA Wealth Management & Trust LLC (AWM&T). Start with these essential aspects of making the most of your military retirement benefits.

Understand Your Military Pension & Retirement Options

After years of dedicated military service, your pension is one of the most valuable benefits you'll receive. Military pension plans vary based on factors such as years of service, rank, and when you joined. To maximize this valuable asset in retirement, you need to understand how it works and what your best options are.

How to Use Your Military Pension

The first step in making financially informed choices for your pension is to identify which plan you have:

  • Final Pay Plan
  • Legacy/High-36 Pension
  • Blended Retirement System (BRS)
  • Disability Retirement
  • VA Survivors Pension

For a full synopsis of the above pensions, please see Navigating Your Military Pension: Making Financially Informed Choices.

From here, essential considerations will ensure you receive your best payout to retire securely. This includes meeting and exceeding contribution limits, maintaining longevity requirements, or seeking promotions, special pay, or assignments to boost your base pay.

Retirement Planning 101

A well-thought-out plan can lay the foundation for a fulfilling retirement, by ensuring financial stability, providing emotional well-being, and creating a smooth transition into your next phase of life. It includes elements such as evaluating your specific retirement accounts and combining them with other applicable income streams such as Social Security or disability benefits.

Once your retirement plan is aligned with your goals, regularly review and adjust it as your circumstances change. Life events, investment performance, and evolving goals may require modifications to your strategy. Staying flexible and adaptable is essential to ensuring that your retirement remains on track.

Navigating Medical Benefits in Retirement

Healthcare is a top concern for retirees, and military Veterans have access to unique medical benefits.

Military Medical Benefits

TRICARE plans for retirees include:

  • TRICARE Prime: A managed care option with lower costs when you use network providers.
  • TRICARE Select: A fee-for-service option that allows you to see any TRICARE-authorized provider.
  • TRICARE For Life (TFL): A program that works with Medicare to provide comprehensive coverage for retirees age 65 and older.

Please note, that although TRICARE covers retirees, Medal of Honor recipients, and their families, other separated service personnel are generally not covered. Veterans who do not qualify for TRICARE are typically eligible for medical services through the U.S. Department of Veterans Affairs (VA) health care.

How to Secure Medical Benefits in Retirement

To be eligible for TRICARE retiree benefits, you must meet the following criteria:

  • Have served at least 20 years of active-duty service in the U.S. military or be eligible for retirement under the Temporary Early Retirement Authority (TERA).
  • Have retired from the military and are receiving a pension.
  • Meet the age requirements for specific TRICARE programs.
  • Continue to pay applicable premiums, fees, and copayments for your chosen TRICARE plan.

Military retirees need to understand their specific TRICARE options and responsibilities, as eligibility and requirements may vary based on factors such as location, family composition, and age. Staying informed about any changes in TRICARE policies and enrollment processes is crucial to ensuring uninterrupted healthcare coverage during retirement.

Home Loans — Qualifying for a VA Loan Using Retirement Income

VA home loans offer Veterans an excellent opportunity to maximize retirement benefits by providing access to affordable homeownership, leveraging retirement income for qualification, and offering flexible financing options. This can help you secure stable housing, build equity, and enhance your financial security in your post-service life.

VA Loan Benefits

Veterans can leverage VA home loan benefits to enhance their retirement plans through:

  • Lower Interest Rates and No Down Payment: With rates lower than conventional mortgages, VA home loans can result in substantial long-term savings. Additionally, purchasing a home without a large upfront cash payment allows for the preservation of retirement savings.
  • Qualifying with Retirement Income: Veterans can use their military retirement income as a stable source of funds. This includes pension payments, disability compensation, or any other retirement-related payments.
  • Accessible Financing Options: Veterans can choose between fixed-rate and adjustable-rate VA loans for a mortgage that aligns with personal retirement strategies
  • Streamlined Application Process: With fewer bureaucratic hurdles and a dedicated support system, Veterans can efficiently navigate the mortgage process.

Wealth Planning — Survivor Benefits and Estate Planning

Planning for the future of your loved ones is an essential part of retirement. Familiarize yourself with the benefits available to the children of Veterans, and ensure that your survivor benefits and estate planning are in order.

Survivor Benefits

The Survivor Benefit Plan (SBP) provides a portion of military retirement income to the surviving spouse or eligible dependents in the event of the passing of a service member. Here are some key considerations:

  • Understanding SBP: The SBP allows you to elect to provide a portion of your military retirement pay as an annuity to your surviving spouse or eligible dependents. This annuity can provide a significant financial lifeline after you're gone.
  • Coverage Level: The cost of SBP coverage varies depending on the level of coverage selected, the percentage of your retirement pay to be covered, and whether it includes cost-of-living adjustments (COLAs). Weigh the costs against the benefits to determine the appropriate coverage level to meet your military family’s needs.

Estate Planning:

Estate planning is not solely about the distribution of assets; it's also about providing for your family's financial security and ensuring that your wishes are carried out smoothly. By working with legal professionals and understanding your options, you can create a comprehensive estate plan that protects your assets, minimizes stress for your loved ones, and maximizes the benefits your heirs receive.

Considerations include:

  • Working with a qualified attorney
  • Establishing wills and trusts
  • Stipulating advance healthcare directives
  • Minimizing taxes and probate
  • Making beneficiary designations

Financial Planning with the Thrift Savings Plan (TSP) and Military Perks

Understanding how to leverage your Thrift Savings Plan (TSP) can significantly boost your retirement savings.

TSP Strategies to Enhance Your Retirement:

  • Maximize your TSP Contributions: Contribute as high a percentage of your pay as possible to your TSP. Then, consider diversifying your investments to align with your risk tolerance and retirement goals.
  • Contribution Limits: Stay informed about the annual contribution limits set by the Internal Revenue Service (IRS).
  • Automatic Payroll Deductions: Set up automatic payroll deductions to contribute a portion of your salary to your TSP account. Consistent contributions over time can result in substantial savings due to compound interest.
  • Catch-Up Contributions: If you are age 50 or older, take advantage of catch-up contributions. These allow you to save even more toward your retirement goals.
  • Review and Adjust: Periodically review your TSP investment strategy to ensure it aligns with your changing financial objectives and life stages. Consider adjusting your allocations as needed, especially as you approach retirement.

Military Perks:

Military Veterans often have access to a wide range of discounts and perks from various companies and organizations. These perks can provide you with valuable savings and benefits during retirement. They include:

  • Retail Discounts
  • Travel Benefits
  • Insurance Savings
  • Education and Training
  • Local Community Resources

Legal and Business Support Through Military Benefits

Military retirees often have access to legal and business support services that can prove invaluable during retirement. Here are some helpful resources:

Legal Services

Retired servicemembers and their dependents are eligible for free legal assistance at their local military installation. These services include:

  • Drafting powers of attorney
  • Writing wills
  • Guiding estate planning
  • Providing family law advice (adoption, marriage, divorce, alimony, and property division)
  • Reviewing contracts and leases
  • Providing notary services
  • Offering consumer advice (e.g., debt management, credit reporting, and identity theft)
  • Helping with taxes
  • Assisting in immigration and naturalization issues
  • Advising in civil lawsuits
  • Protecting service members’ rights and responsibilities

Please note that legal assistance is provided based on available resources and personnel. If a Judge Advocate General Corps (JAG) office can't help, they may connect you with a lawyer referral service.

Tax Benefits for Veterans

Veteran tax exemptions are designed to recognize and honor the sacrifices and contributions of Veterans by providing special provisions for federal and state taxes. By capitalizing on these exemptions, Veterans can reduce their tax liabilities and increase their financial stability in retirement.

Business Opportunities

For many Veterans, entrepreneurship is a way to channel their skills, discipline, organization, and military experiences into a new career path. There are important factors to consider, though, including financing options, grants, certification, and loans. Read what you need to know before starting your Veteran-owned business, here.

Maximize Your Military Retirement with AWM&T

Whether it's your pension, healthcare, homeownership, wealth planning, financial investments, or legal support, there are numerous resources and benefits available to help you thrive in retirement. For informed decisions to ensure a comfortable and fulfilling post-military life, contact an AWM&T Relationship Manager today. We’ll provide you with personalized service that puts your family’s finances first. Speak to one of our military financial professionals, or give us a call at 1-910-307-3500.