Thinking Long-Term

Spouse wrapped in a hug

Some service members will transition smoothly into civilian versions of the jobs they did in the military. Others will be looking at a career shift. Either way, it’s important to carefully consider your family’s financial needs BEFORE settling on a career path. How much do you need to earn to maintain (or achieve) your desired standard of living? Figuring this out can be more challenging than it seems. It’s not enough just to look at your base pay and BAH. To accurately replace your military income, you need to consider other factors:

Health care: If you are retiring from the military, you will continue to be eligible for health care coverage through TRICARE. Be aware that even though you are still covered by TRICARE, as a retiree family your costs will be higher than when you were on active duty. Depending on your TRICARE plan, your new costs may include annual TRICARE Prime enrollment fees; TRICARE Prime network copayments; higher TRICARE Standard and Extra costs; and increased catastrophic caps

Separating service members can receive health care through the VA for up to five years after leaving the military.  However, the VA does not provide health care to family members.  For many families, the best option is to purchase health coverage offered through your employer. Be sure to check the cost carefully. You may have to pay premiums, co-pays and deductibles, all of which will drive the annual cost of coverage much higher than TRICARE.

If you are not able to obtain health coverage through your employer, you can purchase health insurance through your state exchange. Again, it is important to read the plan details carefully in order to know what costs your family should expect.

Life Insurance

Active duty service members are automatically enrolled in Servicemembers’ Group Life Insurance (SGLI), which provides families with up to $400,000 in the event of the service member’s death. A military spouse and children may also be covered through the optional Family Servicemembers’ Group Life Insurance (FSGLI). This coverage disappears when you leave the military. It’s still wise to plan for your family’s future; however, most life insurance options are more expensive than SGLI and FSGLI. Begin looking for replacement policies several months before you transition from the military.


Once you retire or separate from the military, you lose many of the tax advantages associated with military service. For example, many service members maintain legal residence in a state with no state income tax over the course of their career. After separation, you will have to become a legal resident of the state where you live and pay those state income taxes. This applies to a spouse as well who used the Military Spouse Residence Relief Act while the service member was on active duty. In addition, some states exempt service members from property or car tax; that will no longer be the case following separation or retirement. Finally, be aware that states treat military retirement pay differently. It is subject to state income tax in some locations but not others. Consider your state and local tax burden when deciding how much you need to earn.

Retirement Savings

If your service member planned to spend a full career in the military, you may have been counting on receiving a pension after 20 years or more of service. With that prospect gone, you need to think about saving more of your income to make up for the lost pension. If you have invested in the Thrift Savings Plan (TSP), you’ll need to decide if you’ll move those funds to another plan. Once you leave the military, you can no longer add contributions to TSP.

If crunching all of these numbers sounds overwhelming, don’t despair. Help is available from a variety of sources. USAA offers a wide range of assistance on its website for families leaving the military, including a separation financial assessment tool and a downloadable guide to leaving the military. If you feel you need one-on-one advice, the Financial Planning Association can help you find a Certified Financial Planner to work with. In addition, completing a family budget is an element of the Transition GPS curriculum, which all transitioning service members must complete.

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