Financial planning is different in retirement, but the same three components that were important when on active duty or while transitioning are still vital:

  • Budgeting for today
  • Saving and investing for tomorrow
  • Protecting against unexpected risks

Think of these tasks as three as three legs of a stool: Neglecting any of them will unbalance the stool and topple your financial stability. These components evolve from active-duty service, to transitioning from the military, and finally to retirement.  

This is the third of three articles and addresses the specific habits needed as military families are in retirement so that they can continue financial success, even if they are on fixed incomes.

Related: 3 ways to be better with your finances while you’re in the military »


It is critical to minimize large, recurring costs as you retire and the best way to do that is to carefully consider where you will live, while you still have flexibility to move. Living in a location with low or no taxes on military retirement and social security, lower housing and other costs, and easy access to health care and recreation can significant lower your monthly expenses.

Your income depends on when you decide to receive Social Security or 401(k) distributions. The later you draw the benefit, the more you can receive monthly, so you should carefully plan your needs in retirement and decide accordingly. Social Security provides a personalized benefit statement which will estimate for you and your spouse what your earnings will be, depending on when you start to receive Social Security.  

Saving and investing.

In retirement, you finally will use the funds that you have saved over your lifetime. Since you don’t want a sudden loss in your retirement accounts, you should increasingly shift more of your investments from assets like stocks or equities — which have a higher average return but greater fluctuations — to assets like bonds or stable value funds  — which earn less on average, but also have a smaller chance of loss.

Still, carefully look at costs and the fine print in policies, especially those that guarantee great returns with little risk. Have a trusted relative or advisor check out proposals, because if they sound too good to be true, they probably are.

Related: 3 ways to be financially prepared when you transition »


In retirement, there is less need for term life insurance, which will also be more expensive. However, most people should have a base of permanent, whole-life insurance (from $10,000 to $100,000) to provide immediately available, tax-free funds to help settle final expenses, pay off debts, and transition your estate. The earlier that you start a whole-life policy, the less expensive it is to provide permanent insurance protection at very low cost throughout your life.

Costs of long-term care is an unexpected risk, and long-term care insurance may be appropriate to address that risk in some cases. Additionally, some whole life insurance policies (including all those from AAFMAA) have a long-term care settlement option in which those policies pay the benefit to the insured tax-free, if they need long-term care.

Understanding the three components of a good financial plan — budgeting, saving and investing — and protecting against unexpected risks can work for you throughout your military service and afterward. By using these financial skills, you can make the most of your hard earned money throughout your life.