How to financially prepare for retirement
By MyArmyBenefits Staff
As you begin to plan for retirement, one of the necessary steps is discussing your financial plans. For your entire career, you know when you will receive your paycheck and how much it will be. You receive a Basic Allowance for Housing (BAH), free medical care, and financial assistance for school. For most of your career, you probably didn’t have to plan for many contingencies. However, after retirement, life can be less predictable. A financial plan can help you succeed in retirement by preparing you, and your family, for both the expected and unexpected.
When you are two to three years out from your planned retirement, gaining information that will give a precise picture of your future finances can be a slower process. However, by using available tools and information, you can start planning and adding details as they become available.
The first recommendation is looking at your financial situation by creating a personal financial statement. The way to begin creating this is to:
- Identify your current assets, liabilities, and discretionary income spending. (Include bills, savings, what you own, what you owe, and where money goes after bills are paid.)
- See what your current tax liability is. What is your state and local liability for income and property taxes?
- Create a budget; now is a great time to start one using the information from the above two points.
Once you have an idea of where you are, you should project your finances into the future. Only you can decide whether your current savings meet your goals. Depending on your decision about how you’ll retire, whether you’ll start a new career, not work, or take a “gap year,” you may need to increase your savings. If you plan to continue working, it could take time to find a new job, so you will want to plan for living expenses to be paid from savings immediately following retirement. Experts recommend you have a transition fund of at least six months to cover living expenses.
You will want to count all income and benefits that will be available to you after retirement, including military pension, disability, Thrift Savings Plan (TSP), GI Bill, college fund, and savings plans. Use the MyArmyBenefits Retirement Calculator to get an accurate estimate of retirement income at your projected rank and retirement date. This estimate will allow you to calculate additional retirement income needs.
You will also want to list all military-provided benefits that will become expenses after retirement. This can include housing payments, medical, dental and vision insurance, and life insurance. The MyArmyBenefits Survivor Benefit Plan (SBP) Premium Calculator can assist in projecting the cost of SBP and/or Reserve Component SBP Premiums. You are also able to calculate the benefits that would be provided to your survivor(s) in the event of your death using the MyArmyBenefits Survivor Benefits Calculator.
Military retirement is a life-changing event for you and your family, not just a job change. The above information should help you start planning for the day you take off the uniform. For more detailed information, visit MyArmyBenefits to assist with benefits information and calculations for both pre- and post-retirement.
