Moving from military to civilian life can be a challenging transition. Many service members find their new financial situation especially difficult to navigate, so it’s important to move forward with your new career and anticipate your expenses carefully. Below are a few wealth management tips to help those who are leaving the military prepare for their new situation.

Financial Tips for Transitioning From Military to Civilian Life

1. Examine Changes in Your Earnings

Military pay is usually a combination of taxable base pay and a variety of tax-free allowances. Active-duty service members may receive hazardous duty pay, a generous housing allowance, and additional compensation for family separation. Your medical and life insurance policies are also covered without paycheck deductions.

However, most civilian pay is subject to tax, which results in lower take-home pay for similar incomes. A $50,000 annual income in the military may equate to a $60,000-per-year job in the civilian world. Before job-hunting, figure out how much you’ll be taking home so you can clearly compare different opportunities.

2. Explore Your TSP Options

The military’s Thrift Savings Plan (TSP) like most employer-sponsored plans has limited investment options.  While they may have lower fees than other services, the potential for higher returns and more hands-on management can often be more beneficial than setting it and forgetting it. Of course, retired military members can always leave their funds in these accounts even after retirement but exploring what options are available to you is never a bad idea. 

If you’re confused about the options, consult with a wealth management advisor before making a decision to understand what provides the best opportunity to help you reach your goals with the least amount of risk.

3. Build Up Your Savings

Ideally, you'll start your new career shortly after leaving the military. However, this is not always the case for service members returning home, so have some cash saved up to get you through the transition in case there's a delay.

Most experts recommend saving up enough to cover your living expenses for at least six to twelve months. Even if you have a new job lined up, these resources will help cover finding a new home, unexpected car repairs, and other emergency situations that might pop up.

If you’re preparing to retire from the military, trust Anchor Wealth to help make the transition as smooth as possible. They’ve helped retiring veterans throughout Tennessee adapt to civilian life and plan for their financial future. Visit their website for more on their wealth management services, or call (615) 357-8865 to make an appointment today.