Are You Ready? Whether you are a few years or decades away from retirement, make sure you have a solid financial plan.
Retirement can seem eons away for a young military family. But before you know it, 10 years have passed and you’re mid-career. And then, in what can seem like the blink of an eye, the service member is signing his or her DD-214 and you and your spouse are looking at each other wondering what to do next.
Don’t let the “R” word scare you. Get ahead of it by taking some simple money-wise steps to prepare for it at each stage of your military life.
Starting: Establish a solid financial foundation
This is an exciting, yet often financially stressful, time for military families. The good news? The younger you are, the more time you have to build wealth and work toward your endgame. It’s also the time to establish good financial habits.
- Start an emergency fund.
- Follow a budget and avoid unnecessary debt.
- Talk to your spouse about finances on a regular basis. Make sure you are both on the same page, especially when it comes to spending.
- If you are financially able, create a longer-term savings plan that includes funding retirement accounts such as a TSP or an IRA.
- Make a strategy for paying off any student loans or funding current or future college plans.
Mid-career: Financial stability
This is when many military families first have a disposable income. Enjoy yourself and have some fun – you earned it! But be careful not to overspend and incur debt. This is also the time when families grow and expenses can increase. Take a good, hard look at where you are financially and where you want to be in 10 years. Assess the goals and strategies you have in place and make any necessary changes.
- Check your credit score and see where you can make improvements. Make a concerted effort to pay off any debt, especially credit cards and student loans.
- Think seriously about your family’s goals for retirement. When do you want to retire? Will there be a new career for your service member or yourself, or a return to school? Will you have kids in college at that point? Where would you like to live?
- If you haven’t already started investing for retirement, make a commitment to do that now. Consider consulting a financial advisor for information on what products might work best for you.
- Research military retirement benefits. Figure out what your retirement pay might look like.
- Decide whether the service member should transfer any GI Bill benefits to family members. There are stipulations on when this can be done, and the service member will likely incur an additional service commitment so it’s important to do this now.
The finish line: Reap the rewards
This is it – the light at the end of the tunnel. The last few years leading up to retirement and immediately after require some serious financial introspection, but if you’re lucky (and planned smartly) everything you’ve worked for the past 20 plus years is now in your grasp.
- Pay off debt and do not incur any more. Seriously.
- Stockpile extra cash. Instead of investing in your IRA, consider putting that money into a savings account or certificate where it will be readily available as you transition.
- Confirm what your retirement income will be. Your unit’s personnel section should be able to run the numbers.
- Determine how much income you’ll need to sustain your desired standard of living. This is tricky because everyone’s needs and wants are different. Some want to buy their dream home, while others might have kids or adult family members to support. Remember that things like taxes and expenses will change. No more tax-free housing allowance is a big one, as is potential increased costs for health care.
- Make a final plan of where you want to go and what you want to do, but remember to be flexible. Don’t be afraid to live your dream!
Want to learn more? Check out Navy Federal Credit Union’s upcoming retirement seminars and other financial workshops at bases across the U.S. Click here for more information and to sign up today!
Navy Federal is federally insured by NCUA