Military Retirement Planning – Seven Ways to Mitigate Your Cash Flow Risk

A lot of people settle for jobs they wouldn’t otherwise pursue because their financial position doesn’t allow them to go back to school, start their own business or some other activity that doesn’t provide immediate income. Consider a scenario in which you can set the conditions to get through that initial one or two years…
Advertising Disclosure.

Advertiser Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone. This article may contain links from our advertisers. For more information, please see our Advertising Policy.

The Military Wallet has partnered with CardRatings for our coverage of credit card products. The Military Wallet and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on The Military Wallet are from advertisers. Compensation may impact how and where card products appear, but does not affect our editors’ opinions or evaluations. The Military Wallet does not include all card companies or all available card offers.

A lot of people settle for jobs they wouldn’t otherwise pursue because their financial position doesn’t allow them to go back to school, start their own business or some other activity that doesn’t provide immediate income.

Consider a scenario in which you can set the conditions to get through that initial one or two years of income uncertainty. Once you do, you are able to spend the next 30 years doing something that you really like to do and can do it profitably. Doesn’t this strike you as much more appealing than just settling for whatever opportunity happens to be available?

If you really want to take the time to make it happen, below are several things you can consider doing to increase your chances of succeeding.

1. Start Your Military Transition Early

Don’t wait until you’re starting your Transition GPS class (formerly known as TAP) six months before retirement to decide you’re going to take the plunge. If you wait, you likely won’t have enough time to do the due diligence and take the right steps to succeed. Instead, you should start thinking about what you want to do at the 15-year mark.

2. Budget for Your Military Transition

You should have six months to two years of living expenses in an emergency savings account by the time you retire. You want to have enough money set aside to get you through the next two years as you adjust to post-military life. While you will have your pension, you should be very careful when considering how much pension you will actually receive. You probably will want to start saving for this at five years out. Use the guidance below:

Six months: If your spouse works, or if you’re moving into an available job opening that pays your current salary (or higher), you are in a fairly stable position. You’ll still want to have six months’ living expenses saved to account for higher taxes and all of the unanticipated adjustments (such as paying more for medical care and life insurance) that you’ll discover in your first two years.

One year: If your spouse does not work, or if you anticipate moving into an available job that does not start at your current salary, you should set aside one year of living expenses.

18 months: If you’re not immediately going back to work, or anticipate having a tough time finding the job that you want, you may want to budget 18 months’ living expenses.

Two years: If you plan to go back to school, you’ll want enough money set aside to get you through school. If you plan to open your own business, you should at least have two years’ living expenses and two years’ anticipated business costs set aside. If you’re looking to borrow money in the form of a business loan, you should at least have two years’ loan payments set aside. This might require some research into how much money you need for your business and doing the homework to find out what two years of loan payments would look like.

Living expenses: Take a look at your spending, and develop a good estimate of what your monthly needs are: mortgage, insurance, taxes, groceries, car payment and college savings plans. Take this time to eliminate any unnecessary spending, but you should have a good estimate of how much you spend on a monthly basis. Multiply this number by the number of months to come to your estimated savings goal.

3. Invest in Yourself

There is a lot that you can do to make sure you’re adequately prepared for post-military life. Going to school, whether it’s for a degree or a specific credential, is probably the most obvious thing that you can do. You should plan to spend two years for each year of education you need. If your curriculum requires one year of education, you should budget two years to complete it on time. If you have a certification exam, you should investigate that separately, and budget the appropriate amount of time and money.

However, investing your time is just as important as the money you put into it. For example, you may want to have a career in a field that involves public speaking (like a teacher), but you’ve always been terrified to get in front of people. A Toastmasters membership is a very low-cost way to develop or enhance your public speaking skills. However, you probably need to commit to one day per week for a year to really see results from that investment. Investing your time is just as important as investing your money.

4. Get a Side Hustle

If you plan to start your own business or go into a completely new field, this is something you might want to consider as a way to get a head start. If you think of this as getting an actual paying job, this might not be practical, or even legal at your command. However, you can probably find a way to do side-jobs that are related to your career or your intended future career, especially on a volunteer basis.

For example, if your goal is to be a teacher, you can probably guest-teach a class for any number of volunteer programs. While you might not always get paid to do this work, being able to add any additional experience to your resume is always a good opportunity. An additional benefit is being able to increase this effort as you retire and possibly offset some of your income needs while building your business or looking for a permanent job.

5. Network Where You Plan to Retire

Unless you have a compelling reason to move, you should plan to retire at or near your last permanent duty station. A huge reason for this is your ability to get involved in your local community. You can volunteer locally, you can join any number of networking meetings, become involved with your school’s PTA or with your church or any number of activities that help broaden your relationships within the community. While it may not be directly related to your next job, you never know when having a friend or colleague in the right place can help you out.

6. Have a Backup Plan and be Prepared to Pivot

For some people, things just don’t work out as planned. Perhaps the job opportunities aren’t lining up as they used to (for people who want GS or DoD contractor positions, this is a huge risk given the current budget environment), or your business isn’t taking off the way you wanted. However, you should always have a primary plan, with target dates, then be prepared for contingencies at certain milestones.

For example, let’s imagine you’re looking for jobs within the local area, but no desirable jobs are available in your career field. If, after three months of working with a headhunter or recruiter firm, you have no results, you might want to open yourself to moving outside of the area or to broaden your job search to other career fields. If you’re operating your own business, you should adhere to the timelines that are in your business plan (and budgeted for appropriately). However, you also need to know when to pull the plug and execute a backup plan.

7. Talk About it with Your Family and Make Sure They Support Your Plan

This is the most important part of your post-retirement planning. No amount of planning, preparation or hard work is worth it if it means hurting your relationship with your family. However, with your family’s support, you may find that you can do a lot more than you initially thought. Finding a way to cut expenses by $500 per month is a much easier process when your family is part of the plan than when you arbitrarily tell everyone your plan. All of these things count toward a successful transition.


About Post Author

Get Instant Access
FREE Weekly Updates! Enter your information to join our mailing list.

Reader Interactions

Leave A Comment:

Comments:

About the comments on this site:

These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

The Military Wallet is a property of Three Creeks Media. Neither The Military Wallet nor Three Creeks Media are associated with or endorsed by the U.S. Departments of Defense or Veterans Affairs. The content on The Military Wallet is produced by Three Creeks Media, its partners, affiliates and contractors, any opinions or statements on The Military Wallet should not be attributed to the Dept. of Veterans Affairs, the Dept. of Defense or any governmental entity. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. The content offered on The Military Wallet is for general informational purposes only and may not be relevant to any consumer’s specific situation, this content should not be construed as legal or financial advice. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss. References to third-party products, rates and offers may change without notice.

Advertising Notice: The Military Wallet and Three Creeks Media, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet; For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked and this compensation may affect how, where and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings or lists are fully comprehensive and do not include all companies or available products.

Editorial Disclosure: Editorial content on The Military Wallet may include opinions. Any opinions are those of the author alone, and not those of an advertiser to the site nor of  The Military Wallet.