How Should You Prepare for Military Retirement?

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Approximately 1.3 million people serve in the United States military, with more than 800,000 considered a part of the reserves. More than 2 million Americans are considered to be military retirees.

David Lee, CEO and founder, of Mach 1 Financial was a United States Air Force F-16 Fighter Pilot, where he served for nearly a decade. In this article, we’ll discuss some tips and important questions about military retirement and David weighs in on some of his personal experiences when leaving the Air Force.

“It was an honor and a privilege to serve our nations’ Air Force for over a decade as an F-16 Pilot. During my time in the Air Force, I served alongside some of the brightest, most capable people I’ve ever worked with. I am so thankful to have had the opportunity to fulfill a childhood dream of flying the F-16.” – David Lee

Although the military pension system has changed since 1980, more military retirees will be receiving 50% of their final salary for the rest of their lives. This system allows more service members to retire around the age of 40. The United States military’s pension system is considered to be one of the most generous pension systems in the nation.

The U.S. military paid veterans $57 billion in pension benefits in 2015, which is nearly 10% of the service’s annual budget. Even though military pensions are generous, meeting the requirements to qualify can be challenging. Only 17% of service members stay long enough to qualify for these retirement benefits.

Service members are eligible for pensions after serving active duty in the U.S. Army, Navy, or Marine Corps for at least 20 years. They may also qualify for pension benefits if they retire for medical reasons from the service.

While the commitment to the military’s mission, the service’s professional training, and the more regimented work places may differ from the civilian world, everyday life is similar.

Service members sleep in regular beds, shop at the same stores, and conduct business at the same banks (or credit unions) as civilian workers. However, transitioning to civilian life can be trying.

 “Transitioning from the Air Force to the civilian world was not easy for me, and I know it’s not easy for thousands of veterans who leave the military for the civilian world. However, there are some great resources available to help make that transition easier, such as American Corporate Partners (” – David Lee

If you or someone you know expects to retire from the United States military, read these four tips and tricks to help prepare for this next step in life.

1. Take a look at your budget

Life in the military comes with a level of financial stability. If you lived on a base, you may have taken some expense for granted. For example, clothing, health care, and housing.

“In the military, I didn’t have to worry about health insurance premiums, dental care, or even a mortgage [I lived on base for my final assignment]. So, having a plan and budget in place for these new expenses is critically important for a smooth transition to civilian life.” – David Lee

While pension checks may fill some of these expenses when you leave the military, you will still need to monitor expenses you may have ignored while in the service. It’s important when trying to avoid unanticipated budget burdens, like car payments, rent or mortgage payments, and clothing costs.

Veterans are also eligible to receive savings and discounts on services, however not many people take advantage of these opportunities. Using some of these veteran discounts can help save some money and add additional cushion to your budget. Check out to learn more.

2. What about taxes?

While you were in the service, you paid taxes on your military income. Your pension payments are also taxable as income on the federal level. You should look into how your state taxes your pension benefits. Different states have different taxation rules. For example, some don’t tax pension benefits while others do.

Retirees have a tendency to want to move to a state that does not have these taxations on military pensions. However, analysts warn that this may be a mistake. It is important to do lots of research to ensure that you are making the right decision. Some factors that are important to consider are cost of living and other taxes and fees. By doing the research and crunching the numbers, you can find the best place to live (and work) to fit your specific needs and budget during your retirement.

“I chose NWA because it was close to my hometown of Fort Smith and it was where the economy was vibrant and expanding.” – David Lee

3. Filling the life insurance gap?

Once you leave active duty, you and your dependents lose the Servicemembers’ Group Life Insurance (SGLI).

You have a year and additional 120 days to apply for Veteran’s Group Life Insurance (VGLI). This does not require medical exams. However, if you apply after 240 days, you’ll be required to respond to health questions and may be subject to medical examination. Your maximum coverage equals the SGLI coverage amount you had during your service. You may apply for lower amounts in $10,000 increments. You may also increase your coverage by $25,000 every five years to a maximum of $400,000, until the age of 60.

 “I recommend you get competitive quotes on life insurance and as a rule-of-thumb, obtain 10x your annual income.” – David Lee

4. Learn about retirement benefits.

While the military’s pension benefits are an attractive incentive, service members should learn the specific retirement plan that’s available to them. Eligibility depends on your enlistment date.

  • Before September 8, 1980: eligible for the military’s Final Pay retirement system
  • Between September 9, 1980 and July 31, 1986: are eligible for the High 36 system
  • Between August 1, 1986 and December 31, 2017: eligible for the REDUX system
Advisory services offered through Coppell Advisory Solutions, LLC dab Fusion Capital Management, which is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission and does not imply that the advisor has achieved a particular level of skill or ability. All investment strategies have the potential for profit or loss. Third party ratings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation.


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