>No. 1: Plan in advance
>No. 2: Evaluate your insurance
>No. 3: Get your financial house in order
>No. 4: Take advantage of new benefits
>No. 5: Adjust to a new bottom line

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No. 3: Get your financial house in order.

With a new job and possibly a new home, it’s an ideal time to do a financial inventory and gather assets you might have spread across the country into one properly allocated portfolio.

In some cases, your changing circumstances might call for new investment vehicles. For example, if college is on your family’s horizon, consider a 529 plan. Named after section 529 of the IRS code and sponsored by individual states, 529s offer tax-deferred growth and relieve you from having to pay federal taxes on qualified withdrawals. And more than 25 states allow you to take an annual state income tax deduction for your contributions. Get more information about savings options and financial aid in the College Funding section of MOAA’s online Financial Education Center.

Consolidating your accounts certainly makes your money management easier, but your efforts also have far-reaching estate planning benefits. “If you own property in other states, your estate may have to go through probate in several states, and that can seriously erode your assets,” says Miller.

No. 4: Take advantage of new benefits.

Although you’ve lost the military’s tax-free allowances, there are tax advantages in the civilian world. Among them is the 401(k) plan, which allows you to reduce your taxable income and save tax-deferred for retirement. Because the money you invest in your plan is taken from your paycheck before withholding taxes are computed, your contributions reduce your total taxable income. You pay taxes on your contributions and earnings when you begin withdrawing money. Some employers even match some of what you contribute, meaning a return on investment before your account earns a dime.

In 2005 you can contribute up to $14,000 to your 401(k), 403(b), or government 457 retirement plan, plus a catch-up of $4,000 if you are age 50 or older. In 2006, that amount will increase to $15,000 with a $5,000 catch-up. If you are age 50 or older and non-discrimination rules keep you from making the maximum contribution to your employer’s plan, you still can make the catch-up contribution. There are a number of useful retirement savings and planning calculators at MOAA’s Web Base.

Also, your company might offer a flexible spending account (FSA) program that allows you to set aside wages tax-free to pay for out-of-pocket medical expenses such as braces or eyeglasses or even the dependent care of a child or adult. With recent improvements to the program, you even can fund purchases of over-the-counter drugs such as cough medicine. Here’s how it works: At the start of each annual enrollment period, you decide how much you want to set aside for the next 12 months to pay for anticipated expenses. If you estimate $1,200, your employer withholds $100 a month from your pay. As you incur qualified, out-of-pocket expenses, you turn in the receipts to your employer, who reimburses you up to the $1,200.

Unlike tax-deferred money eventually withdrawn from your employer’s retirement plan, FSA reimbursements never are taxed. This means the government (federal and most states with income taxes) is underwriting a portion of your expenses. If your combined federal and state income tax bracket is 30 percent, then you’ll save about $400 in taxes on the $1,200 you set aside.

The catch is trying not to overestimate your expenses, because you cannot carry FSA balances into the next year. If there’s money left in your account at the end of the year, you lose it.

Lastly, you might have bonus programs and stock options to deal with for the first time. Don’t be shy about seeking professional help to maximize those benefits, says Savino. He also points out that if your spouse is working, spend time coordinating benefits packages. You’ll both benefit from taking advantage of the best each firm has to offer.

No. 5: Adjust to a new bottom line.

Getting used to a new bottom line on the home front might be easier than on the job front. “Moving from a mission-oriented, nonprofit environment to the corporate world where profits are really important is a huge cultural change,” says Miller.

Trading the military’s discipline and protocol for a more casual, but no less serious, working environment requires moving from “working for the greater good to a company’s good,” adds Savino. And that transition ultimately requires that you look at your career through a new financial lens.

“When you are in the military you know roughly how much everyone makes. If you and another officer have the same family allowances and the same experience, you make roughly the same amount, and there’s a clear path forward,” Savino says. “In contrast, salaries in the private sector are somewhat fluid. Your strengths, skills, and contacts determine what you will be paid. It’s up to you to know what you are worth and to continue to add to your experience to make yourself more valuable to your company.”
Miller and Savino agree on one final key to a successful transition: Ask for help if you need it. In addition to networking with your military friends who have moved successfully into the civilian workforce and can share their experiences, if you have complex financial issues, you might benefit from consulting with an investment professional.