5 Things Military Spouses Should Know When Their Partner Retires

After 20+ years of service, the moment has finally arrived — your spouse is retiring. For every military family, this moment marks a major shift. Everything you’ve known, lived, and breathed for decades will soon be exchanged for a DD214 and a “new normal.” 

Your lifestyle and family’s financial landscape will shift, but where do you start? How do you smoothly transition from a life of service to the civilian world? Here are some considerations from the military financial professionals at AAFMAA Wealth Management & Trust LLC (AWM&T).

1. Your Income Will Look Different

As your family transitions out of military service, it’s natural to wonder what level of civilian income you’ll need to maintain the lifestyle your family enjoyed while serving. While military retirement comes with valuable benefits, many of the allowances you relied on during active duty no longer apply. For example, a greater share of civilian income is taxable because Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS) are no longer part of your compensation.

Beyond simply replacing income, it’s important to define your family’s financial goals and future expenses. These may include buying a home, purchasing vehicles, paying for college, funding retirement travel, supporting charitable causes, or even establishing a family trust. Start by outlining these priorities to gain a clearer picture of the total income required to sustain your plans in retirement.

The chart below offers a helpful comparison between military and civilian pay, but the best next step is to work with a financial planner experienced in military retirement planning to build a strategy tailored to your family’s unique goals and needs.

Source:  AAFMAA Wealth Management & Trust LLC

2. Big Financial Decisions Happen Quickly

Survivor Benefit Plan (SBP)

You and your spouse will need to decide about the Survivor Benefit Plan (SBP) before separation from the military. The SBP provides financial support to military spouses and/or children when a military member dies while on duty or after retirement. Eligible beneficiaries under the SBP are typically spouses or children (referred to as annuitants), who receive a monthly annuity payment upon the retiree’s passing. The SBP pays beneficiaries up to 55% of the servicemember’s retirement pay for as long as the surviving spouse lives, or until the qualified dependent child reaches a certain age.

The SBP is akin to a life insurance policy with no cap, but it is not automatically granted upon military retirement. Retirees have the ability to opt out of this benefit, but require the consent of their spouse to do so.

How the Survivor Benefit Plan (SBP) Impacts Your Finances

• Tax Advantage: SBP premiums are taken out of your gross retired pay before taxes, which lowers your taxable income. This means you pay less in federal income tax than you would if you were paying premiums with post-tax dollars.
• Government Subsidy: SBP premiums are partially subsidized by the government, making them generally lower than the cost of comparable private life insurance coverage.
• Lifetime Spouse Benefit: With SBP, you can provide your spouse with up to 55% of your covered retired pay as a monthly, inflation-protected benefit for life. Premiums are automatically deducted from your retirement pay. Once you have paid premiums for 30 years (360 months) and reached age 70, your coverage becomes “paid-up.” At that point, no further premiums are due, but your spouse remains fully protected.
• Coverage for Children: You can also elect coverage for both your spouse and children. Children remain eligible as long as they are unmarried and under age 18, or under age 22 if they are full-time students. A child who is disabled and incapable of self-support remains eligible for SBP benefits if the disability occurred before age 18 (or before age 22 if still a full-time student).

Learn more on the Department of Defense (DoD) website. 

Thrift Savings Plan (TSP)

Your spouse’s TSP can be left intact, rolled over into an IRA, or consolidated with other accounts. Each option carries implications for fees, investment flexibility, and required minimum distributions (RMDs). Rolling over may require swift action to remain tax-advantaged. Here are some tips to make the most of your military benefits in retirement.

If your spouse made contributions while serving in a combat zone under the Combat Zone Tax Exclusion (CZTE), those contributions went into the TSP on a non-taxable basis. However, any earnings (growth) on those contributions are taxable when withdrawn. For this reason, it may be beneficial to roll over CZTE contributions into a Roth IRA, where future growth can occur tax-free. Evaluate this option alongside other rollover strategies to help maximize the long-term value of your military retirement benefits.

3. You Can Choose Where You Live

One of the biggest lifestyle changes after military service is the freedom to decide where you and your family will call home. After years of relocating based on duty stations, retirement allows you to settle in the location that best fits your long-term goals. As you consider your “forever home,” keep these factors in mind:

• Taxes: States tax military retirement pay differently, which can significantly affect your income.
• Cost of Living: Housing, utilities, and everyday expenses vary widely across regions and should be part of your financial plan.
• Healthcare and Support: Access to quality healthcare, VA services, and strong community resources can be essential in retirement.
• Employment Opportunities: Some areas actively recruit Veterans and military spouses, offering strong job markets and professional networks. 
• Family Connections: Retirement may be the perfect time to live closer to extended family and strengthen those ties.

4. Civilian Life Comes With New Expenses

Military service comes with unique benefits that help offset the sacrifices your family makes. When retirement arrives, many of these benefits will end or change, and it’s important to prepare for the financial impact. 

Expect adjustments in areas such as:

• Healthcare: Transitioning from TRICARE to civilian plans, along with new premiums and copays.
• Insurance: Replacing Servicemembers’ Group Life Insurance (SGLI) or Family Servicemembers’ Group Life Insurance (FSGLI), which ends when your servicemember separates from the military.
• Housing: The loss of Basic Allowance for Housing (BAH) means more out-of-pocket responsibility.
• Education & Training: Costs for continuing education or career development may shift.
• Everyday Finances: Your budget, emergency fund needs, and even everyday bills may look different without waived fees, stipends, or military discounts.

By planning for these new expenses, you can help smooth the transition and ensure your family remains financially secure.

5. It’s Time to Think Long-Term

Retirement from the military opens the door to new opportunities — whether that means pursuing a second career, going back to school, starting your own business, or something else entirely. To make the most of this next chapter, it’s essential to have a long-term financial strategy. As you plan the retirement of your dreams, ask yourself:

• Are your retirement savings strategies aligned with your goals?
• Would consolidating accounts make management easier?
• Have you reviewed your wills, life insurance strategy (such as converting SGLI), and estate plans?
• What steps can you take to ensure financial independence well beyond military life?

Working with a financial professional who understands military benefits can help you avoid costly mistakes and take full advantage of the benefits your family deserves.

Our Trusted Professionals Can Guide You Through Retirement

At AAFMAA Wealth Management & Trust LLC (AWM&T), we’ve helped countless active-duty servicemembers, Veterans, and military spouses navigate military retirement and transition. With decades of experience serving the military community, we understand how military benefits, retirement pay, and complex regulations impact your financial future.

We provide solutions exclusively to those who have served through financial planning, investment management, and trust services. Let us help you create clarity and stability during this transitional time. Call 910-307-3500 or connect with a Relationship Manager today.

About Us

Founded in 2012, AAFMAA Wealth Management & Trust LLC (AWM&T) was created to meet the distinct financial needs of military families. We proudly deliver experienced, trustworthy financial planning, investment management, and trust administration services — all designed to promote lasting security and independence.

We are proud to share the mission, vision, and values of Armed Forces Mutual, our parent company. We consistently build on the Association’s rich history and tradition to provide our Members with a source of compassion, trust, and protection. At AWM&T, we are committed to serving as your trusted fiduciary, always putting your best interests first. Through Armed Forces Mutual's legacy and our financial guidance, we provide personalized wealth management solutions to military families across generations.

© 2025 AAFMAA Wealth Management & Trust LLC. Information provided by AAFMAA Wealth Management & Trust LLC is not intended to be tax or legal advice. Nothing contained in this communication should be interpreted as such. We encourage you to seek guidance from your tax or legal advisor. Past performance does not guarantee future results. Investments are not FDIC or SIPC insured, are not deposits, nor are they insured by, issued by, or guaranteed by obligations of any government agency or any bank, and they involve risk including possible loss of principal. No information provided herein is intended as personal investment advice or financial recommendation and should not be interpreted as such. The information provided reflects the general views of AAFMAA Wealth Management and Trust LLC but may not reflect client recommendations, investment strategies, or performance. Current and future financial environments may not reflect those illustrated here. Views of AAFMAA Wealth Management & Trust LLC may change based on new information or considerations.