Your spouse has reached the end of his or her military service and is moving on. And they're not the only one — Congratulations! While this is certainly an exciting time, the transition from the military to the civilian community can also be a challenging time, for your spouse, you and your entire family.
There are many things you can do as a military spouse to prepare for this new phase of life. Your service member is required to submit documentation and attend training throughout the transition process. Did you know that many of these trainings are open to spouses? Take advantage of the tools and resources that are available to help smooth the transition process and help you gain the skills and confidence to tackle the next chapter in the civilian sector alongside your spouse.
The transition from active duty to civilian is complex and can include a job search, relocation and a major shift in lifestyle and community. Every family’s situation is unique and your experience during transition depends on your situation. We have compiled suggestions and guidelines to help you get your financial picture in focus and be prepared for this new phase.
Let’s first hear from Kristin, an Army spouse, about how transitioning out of the military is a family affair. Watch this video to learn tips to tackle this change with your spouse.
This is the number one thing you can do. Discuss what you want your life to look like after military service. Work with your spouse on your goals and dreams for the future.
Do you or your spouse plan to go back to school? What kind of job do you want?
Ideally, the transition process should begin 12-18 months before your service member’s separation from the military or end of time in service (ETS). Your service member should make an appointment with a transition counselor at your duty station to get started.
Your spouse will be required to attend the Transition Assistance Program (TAP) for his or her branch of the service. This seminar is open to spouses on a space-available basis. Make it a priority to attend this together, if possible! The seminar will cover resources, benefits, and information crucial to the transition process.
Carefully track your current spending and create transition and post-transition plans.
First, make a transition spending plan. Most likely, your family will incur unexpected costs during transition. Some of these costs may eventually be reimbursed, but it is a good idea to have money set aside to cover these expenses instead of relying on high-interest credit cards or loans.
Sometimes, it can take longer than expected to find a job, so make sure your emergency fund is fully stocked with enough savings to cover at least three to six months of living expenses.
Watch this video featuring Ingrid, an Army spouse, who talks about her experiences both with and without an emergency fund.
If you are moving, research the cost of living in the new location, and make sure you’re accounting for all changes in income and expenses.
Next, work on your post-transition spending plan. This is your baseline allocation plan for life after the military.
Let’s now take a look at navigating new employment once your service member separates and your family transitions from the military. Civilian employment can have a big impact on your post-transition spending plan.
For Kristin, a transitioning Army spouse, entrepreneurship has provided an opportunity to build and maintain her career. Watch this video to listen to her experience and consider if that might be a good option for you too.
There are many similarities between military and civilian employment but also major differences. Keep in mind that your service member may lose some benefits after retirement, such as incentive pay or military tax breaks.
Your spouse may also find that civilian compensation is very different. It’s important for your service member to know what benefits are included in his or her pay and what things may be out of pocket.
How much sick and/or vacation time will be earned? Does the compensation package include insurance coverage, such as life, health, dental or disability coverage?
Your service member should know what these costs will be, so they may be factored into your family’s budget.
As both you and/or your spouse look for civilian positions, know how your budget will change post-military and make sure the salary meets your needs to maintain a comparable lifestyle. Don’t be afraid to negotiate salary. Both of you should consider how your knowledge, skills and abilities translate into the job you want and do your research to know the average salary of that job in your area.
One of the most important things you can do as you job hunt is to network, network, network! Visit with a career counselor at your installation’s Family Readiness Center to help assess your skills and interests, guide your job search, and update your resume.
Utilize the Spouse Education and Career Opportunities (SECO portal), DoD Career Ready, and the Military Spouse Employment Partnership (MSEP) to support and guide your search. Brush up on your interviewing skills with these tips from our blog.
Leaving the military may mean changes in your family’s tax situation. Some types of military pay are tax-exempt, but this will not be the case in the civilian sector. Also, be aware that if you are moving to a new community, the state and local tax rates may be different. Research these differences and visit with your installation’s personal financial counselor or a tax professional ahead of time to plan for tax expenses. Account for these changes and make sure to include them in your budget. For additional help, visit Military OneSource MilTax Tax Services.
Educate yourself on the benefits and programs available for military families transitioning to the civilian workforce.
- Relocation assistance: Develop a relocation plan. Military OneSource has great resources specifically geared toward spouses, and they have consultants available to help along the way. Visit this link for more information.
- Education benefits: Military service provides some great educational benefits for active duty members and possibly family members, as well. If your spouse transferred Post-9/11 GI Bill benefits, review special considerations for spouses using the GI Bill.
- State-specific benefits: Beyond benefits afforded by the Veterans Administration, your state of residence may have additional benefits available. Visit your state’s Veterans Affairs Commission and research potential benefits such as tax, education, housing, employment and recreation benefits. Also be sure to visit the U.S. Department of Education to learn about education benefits offered to military families and veterans.
Financial Planning Considerations
Many aspects of your financial life will require your attention as your spouse separates from active duty to civilian status, including insurance, retirement and estate planning.
Know your health insurance options and have a plan in place before your spouse’s separation. Please note, most of these programs have windows of eligibility, so make sure your family has a plan to prevent any gaps in coverage. Make sure to acquire a copy of health care records for all members of your family before separation. Here are options to consider for health care coverage for life after the military:
- Review and sign up for any civilian health insurance if provided by a new employer. Ideally a new employer plan will serve as primary coverage for your family, similar to the TRICARE coverage you’ve had with the military.
- Continued Health Care Benefit Program (CHCBP) — This program is like a premium-based civilian sponsored plan. Coverage is limited to 18-36 months and must be purchased within 60 days of separating from service. Click here for more information.
- Transitional Assistance Management Program (TAMP) — This program is available to some members transitioning from active duty. Visit this resource for more information.
- Veterans Administration Health Care – VA health care may be an option for coverage for your spouse as he or she transitions out of the military. However, the VA does not provide coverage for family members. Click here to find information on eligibility requirements.
- Healthcare Marketplace: Another option for your family to obtain health care coverage is through the Affordable Care Act. Visit healthcare.gov for more information.
Life insurance is another important area to cover. Your spouse was likely covered under Servicemembers’ Group Life Insurance (SGLI) while on active duty. SGLI coverage typically ends 120 days after separation from service, so, assuming you still need coverage, make sure you have new life insurance in place before it expires. Assess what your life insurance needs are with the help of our videos.
One option for coverage is through the Veterans' Group Life Insurance (VGLI) program, which is administered by the VA.
VGLI is a program that allows service members who were covered under SGLI to continue their life insurance coverage. Veterans can apply for coverage within 1 year and 120 days after separation from service. If your spouse applies for coverage within 240 days of separation, he or she will not be required to submit health-related information. VGLI provides coverage as long as you pay the premiums, which are based on the veteran’s age. Please note, the amount of coverage your service member may enroll for under VGLI is based on the amount of SGLI coverage he or she had when they left the military.
VGLI is often a good option for veterans with health conditions that may make coverage through a private insurance company very expensive or impossible.
Compare the cost of life insurance through VGLI and other insurance companies to see what will be most affordable and meet your family’s needs.
As a spouse, make sure you have life insurance coverage, too. Our resource, Money Ready 201: Insure Your Family, provides more information on this important topic.
Assuming your spouse is separating from the military rather than retiring, they will not be eligible for a pension. However, if they have a balance in their Thrift Savings Plan (TSP), they may have to decide what to do with it.
The TSP is a tax-advantaged account similar to a civilian 401(k) plan.
If your spouse was covered under the military's legacy retirement system, he or she would have been the source of any contributions made to their TSP account, either through payroll deductions or a rollover of an IRA or outside retirement plan.
However, if your spouse was covered under the Blended Retirement System (BRS), contributions could have also come from their branch of Service in the form of automatic and/or matching contributions. This is important because of a concept known as vesting that is covered below.
Visit militarypay.defense.gov and click the Blended Retirement tab for more information.
The TSP is a type of account that is passed on to others through a beneficiary designation, like a life insurance policy. The beneficiary is the person who would receive funds at the service member’s death. The period of transition out of the military is a great time to review beneficiary designations and decide if they are still in line with one’s wishes. It’s also a great time to review the investment allocation, ensure it aligns with your risk tolerance and goals, and then determine how you want to manage these funds upon leaving the military. Read through your options below.
As it relates to the TSP, vesting is a term used to describe when money in a TSP account becomes the property of the service member. This is important because vested funds belong to the service member when he or she leaves the military. Funds that are not vested get forfeited.
What happens to the TSP account when your spouse separates from the military? If your spouse was covered under the Legacy System, every contribution he or she made to the TSP was immediately vested, meaning the entire balance is owned by them. See the section below to read about the options for this account upon separation from service.
If your spouse was covered under the BRS, any contributions he or she made to their TSP account were immediately vested, just like the Legacy System. However, automatic and matching contributions made by his or her branch of service are not fully vested (their's to keep) until he or she completes a two-year service requirement. This means some of the TSP balance may be forfeited if your spouse is separating before completing two years of service. See the section below for options for this account upon separation.
- Leave it in the TSP. This option is available as long as there is at least $200 in the account. Investment allocations can continue to be adjusted in the account, but future contributions are limited to rollovers of IRAs or eligible employer plans.
- Roll it into an Individual Retirement Account (IRA). Your spouse can transfer or roll over the balance of his or her TSP directly into a Traditional or Roth IRA with no tax consequences, as long as certain rules are followed.
- Transfer or roll over money to an eligible employer plan. If your spouse ends up with an employer that offers a company retirement plan, he or she may be able to transfer their TSP balance into that plan, tax free if the new plan allows.
- Withdraw all or part of your money. If your spouse is younger than age 59½, then taxes and penalties may apply. Please read the next section
Click here for more information on how to manage the TSP when leaving military service.
If withdrawals are taken and your spouse is under the age of 59½, the withdrawal may be subject to a 10% penalty along with ordinary income tax.
Please note, while the TSP is a qualified plan intended to be used for retirement, there are some special situations where the 10% penalty will not apply. Visit this resource on the TSP website for more information.
After transitioning out of the military, you and your spouse may find new jobs that have a workplace retirement plan, such as a 401(k) or 403(b) plan. If your budget allows, it's often a smart financial move to contribute at least enough to receive any company match that may be offered.
Also, don’t forget that you can still contribute to an IRA to maximize your retirement savings. The more time your savings have to grow before retirement, the more compound interest you will earn, helping you meet your financial goals.
You likely have wills, powers of attorney, and/or medical directives in place, but are they up to date? This is a great time to get these estate documents completed or updated. If you already have these documents in place, review them and make sure they are in line with your current wishes. Your installation’s legal office can aid you in the process.
Also, review the beneficiaries on your life insurance policies and investment accounts to make sure they are up to date.
Visit Military OneSource for more information on the importance of estate planning.
It is difficult to consider a time when you may not be around to take care of your family, but taking the time to have an estate plan in place gives you peace of mind.
Watch this short video to learn about "The 5 Key Estate Documents."
Once your spouse leaves the military, they are issued a form called a DD214. This Report of Separation contains information needed to verify military service benefits and more. This should be checked for accuracy and a certified copy should be kept in a safe place. For more information, visit this DoD site.
As stated above, every family is unique. It's wise to be informed and have a plan for transition. Good luck as you begin the next exciting chapter!
Here are some additional resources available to assist your transition:
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