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Helping service members transition out of the military

By Stacy J. Miller

Service members (SMs) in the Army, Navy, Air Force, Marines, Coast Guard, National Guard, and Space Force have been participating during a time of war for most of their service. Their transition out to civilian life—whether it is after a few years or retiring after decades—is filled with challenges that are vastly different from those in the service. They likely have not focused their time or attention on developing expertise in financial matters and probably have delegated those responsibilities to a spouse or family member. Financial advisors and planners have an opportunity to assist these prospective clients in several ways, including pro bono advice.

The military’s Transition Assistance Program does educate transitioning SMs about money matters. However, this is a one-size-fits-all program. There are many opportunities for planning beyond this program. The four areas that are most important to address with transitioning SMs are cash flow, insurance, investments, and taxes.

Cash flow

The most important thing for SMs and planners to understand is that the final paycheck may not arrive as expected on the final payday. The military audits that final paycheck to make sure it is correct. This may include verifying the SM turned in all their equipment, for example, and it can take days, weeks, or months. On top of this, depending on the role of the SM in the military, finding a new civilian job can be a challenge. That’s because communicating their experience and soft skills such as leadership, teamwork, resilience, loyalty, and grit to a hiring manager is harder than they may think.

The point is the SM could experience a significant gap in cash flow during this transition. They could face many new expenses, such as new housing and new civilian clothes. The value of an emergency or transition fund cannot be over-emphasized.


Military health (including dental and vision) insurance is pretty good, but separating from the military can yield big changes. A veteran (former SM) has access to healthcare facilities through the Veterans Administration, but their family does not usually continue to have access to healthcare after separation. Retirees are an exception to this rule because their families may be eligible for continued healthcare coverage through TriCare.

Military life insurance, known as Servicemember’s Group Life Insurance, is a term policy up to $400,000, and veterans have the option to convert that policy to a veteran policy or a civilian policy within 120 days of separation.

One of the most important decisions for a retiring military SM is whether to sign up for the Survivor Benefit Program. This is an annuity that will send a portion of the monthly pension payment to the surviving spouse should the retiree die first. This is such an important decision that if the SM chooses not to do it, the spouse must sign a document acknowledging it, in the presence of an official witness. Generally speaking, the Survivor Benefit Program annuity is less expensive than an equivalent civilian annuity, so the decision revolves around future expectations for the life and health of the service member and their spouse. It is a tough decision for some, partly because understanding the value of the program is challenging, and partly because the couple’s crystal ball is foggy when they try to see their future.


The Thrift Savings Plan is the workplace retirement plan with matching up to 5% that the military uses. The contributions are pretax unless the contributions were made while deployed to a combat zone. In that case, those contributions are considered tax-free.1

After the SM transitions out of the military, the Thrift Savings Plan can be rolled into a traditional IRA. Some SMs who do not have the help and expertise they need, leave it where it is. While this may work for some, it limits them to only the five funds that are currently offered and is completely self-managed.


The biggest planning opportunity regarding taxes relates specifically to retirees. Taxation after retirement is an important vulnerability that I have seen affect new retirees many times.

Military retirees are relatively young and often find themselves in an encore career. This allows them to have multiple streams of income, most of which are taxed, but with withholding on each based only on the tax bracket and rules for each individual source’s expected annual income. Their disability income is not taxed. However, their pension, their encore civilian career income, and their spouse’s income are taxed. This combination will likely bump them into a new tax bracket. Many will find that their withholding for each was insufficient, so they may end up with a big tax bill. This can really surprise the unprepared retiree. The IRS’s online Tax Withholding Estimator is a useful tool for avoiding such surprises.

Help veterans through NCEF

Change is always hard. Transitioning out of the military into a civilian world that does not really understand what that service was like, even if we all value and appreciate it, is even harder. Setting up this vulnerable population for future financial success is more than our fiduciary duty or our patriotic service. I hope you will consider volunteering your time to help through the NAPFA Consumer Education Foundation’s pro bono opportunities serving some of our most vulnerable veterans. I also hope that what I have shared here will help you assist all transitioning SMs with integrity, empathy, and pride.

Stacy Miller is a Certified Financial Planner™ professional and partner with Bright Investments LLC. She is a fee-only fiduciary wealth advisor and member of NAPFA. Stacy is also a U.S. Army spouse to her retiree husband of 28 years.

1. Combat zone tax-free contributions are commingled with the pre-tax contributions. It is the responsibility of the SM to track the value and treatment of those funds, especially if they roll over to an IRA.

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