>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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A new job means a new financial situation. Ease your transition with these five personal finance pointers.

Congratulations on retiring from the military and accepting your first civilian job. Although the interview process might have prepared you for some differences in your new workplace, the transition from the military to the civilian workforce often triggers a range of personal finance questions. Suddenly, you have decisions to make about health insurance, benefits, and perhaps even a new budget. And if your new job comes at a time when you are getting ready to send your children to college or settle down and buy a home, these issues can seem overwhelming.

But don’t stress out—here are five personal finance pointers to help ease your transition.

No. 1: Plan in advance to ease potential budget pressures.

Many retiring military officers find the first civilian paycheck is the harbinger of just how much life is about to change.

“The first civilian paycheck is a shock,” says Lt. Col. John Miller, USAF-Ret., a CFP and MOAA’s director for contract services and marketing. “You’ve negotiated your salary, talked benefits, and may feel you know what’s coming on payday. The surprise is not so much the difference between your active duty salary and your new, civilian salary, but the realization of what your military benefits added to your take-home pay. An officer’s tax-free allowances for basic housing, subsistence, hazardous duty pay, etcetera, may amount to a couple of thousand dollars a month—and that’s money you now have to get used to doing without.”

The monthly cash flow squeeze, Miller says, comes not only from the military allowances missing from your civilian paycheck, but also from the fact that your retired pay from the military is calculated on your base pay and does not include those allowances.
The “Civilian Pay vs. Military Pay Calculator” available on MOAA’s Web Base, can help you determine exactly how much civilian pay you will need to make in addition to your retired pay to equal your take-home active duty pay.

It’s wise to use the same kind of upfront planning if you’re shopping for a new home to go along with your new job. MOAA’s online real estate section, complete with mortgage calculators, can help you answer some very important questions: How much home can I afford? Should I use a fixed- or adjustable-rate mortgage? Do I qualify for any special government programs? You also should research state and local property taxes in potential new locations to prevent surprises.

Finally, a new wardrobe is an often-overlooked expense in transitioning to the civilian workforce, according to Maj. Carl Savino, USAR-Ret, founder and CEO of Competitive Edge Services Inc., a company in Fairfax Station, Va., that provides free career-transition services to retiring military servicemembers.

“After a number of years in the military, it’s time to say hello to individuality,” he says. “Of course, you bought that one good suit for the interview process, but once you begin your job you want to be viewed as a budding CEO—and you need to dress the part. That’s a significant expense you should plan for before retiring from the military.”

Savino, who co-authored the Corporate Gray Series of books—From Army Green to Corporate Gray, From Navy Blue to Corporate Gray, and From Air Force Blue to Corporate Gray—says start-up expenses from a new wardrobe to furnishing a new home could mean adjustments to your household budget. “Until you get settled, you may need to delay other big purchases,” he says.

No. 2: Evaluate your insurance.

One thing you might discover as you establish a plan for monthly expenses is an unexpected budget bonus in the health insurance department, because your new company probably offers health insurance you might not need.

“If you are retiring from the military, you are covered by the military’s standard TRICARE policy and are eligible to buy the supplement,” says Miller. “If your company is willing to contribute hundreds of dollars a month toward health insurance that you don’t need, try to parlay those dollars into a salary increase.”

Although it doesn’t cost you anything to enroll, TRICARE Standard pays just 75 percent of health care costs for your choice of providers, and Miller recommends you buy a low-cost TRICARE supplement to cover excess charges. The cost is $300 to $500 a year, depending on your age.

Additionally, before you retire from the military, you should make a decision about whether to use the Survivor Benefit Plan (SBP), an insurance plan that guarantees a percentage of your military retired pay to your surviving spouse. According to Miller, SBP costs about 6.5 percent of one’s retired military pay. “Often when officers are contemplating a possible pay cut in the civilian workforce, they don’t want to lose that 6.5 percent right off the top of their retired pay,” he says. “However, I highly recommend the SBP because it is government subsidized. Recently, MOAA researched life insurance alternatives, and we could not find another insurance provider [that] could beat the premiums for the SBP. It’s the best life insurance going.”

Miller does suggest, however, that you shop around if you want to buy additional life insurance. “[When you’re] on active duty you have $250,000 worth of Serviceman’s Group Life Insurance. The day you retire, you lose that and are eligible to buy Veteran’s Group Life Insurance (VGLI),” he says. “However, that coverage is very expensive because there is guaranteed acceptance, regardless of health conditions.”

Miller explains, “Therefore, if you are reasonably healthy, it makes sense to look around, because there are plenty of life insurance policies out there that will be less expensive than VGLI.”

 

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