Transitioning from Military to Civilian Life
Transitioning from military to civilian life can be challenging, and finances are typically one of the bigger hurdles faced by veterans. If you are making this type of move, here are some things to consider regarding finances.
Generally, military members receive tax breaks that don’t apply to civilians. Keep that in mind when you transition to civilian life. The best way to prepare is to consult with a tax professional to review the benefits you’ve been receiving and how those will change once you are a civilian, so you will be prepared to make adjustments and plan for those differences.
Your health insurance options may vary depending on when and where you served, length of service, your type of discharge and other factors. Unfortunately, medical bills are one of the leading causes of bankruptcy. It’s important to carefully review health care options and try to maintain health care coverage to help you avoid major out-of-pocket expenses.
You may want to maintain your current TSP (Thrift Savings Plan) account after you leave the military. If not, there are plenty of additional options to consider, including rolling the account into an IRA or an employer-sponsored retirement plan. Rolling over a TSP can be complex because many of your contributions will have been made with tax-free combat pay. Before making any decisions, it’s a good idea to talk with an investment advisor who has experience dealing with TSP accounts.
Budget and Savings
As a civilian, your budget will probably be much different. It’s likely you will have new expenses that you didn’t have before. It may include new items like housing, insurance and taxes. You also need to consider savings and retirement. And, keep in mind that, while your military check was very stable, that isn’t always the case with civilian jobs. You will want to start an emergency fund for loss of income or unexpected expenses. Experts typically recommend keeping three to six months of living expenses in savings.