8 Ways To Be Financially Prepared For Civilian Life

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A Naval Support Activity Mid-South Sailor takes a moment to decide which credit card to use to complete his purchase at the local commissary.
Photo by Petty Officer 2nd Class LaTunya Howard

If you’ve served more than a few weeks in the Army, odds are you’ve heard the phrase “No more Task Force Smiths!” It refers to a combat operation meant to halt the North Korean advance in the opening days of the Korean War. The North Korean infantry quickly overtook the ill-prepared, outnumbered, and poorly equipped soldiers, resulting in more than 150 casualties. “No more Task Force Smiths” serves as a warning to never send unprepared service members into harm’s way.


No one wants to storm the beaches and find out they’re woefully unprepared, but it happens. Like going into combat, separating from the military is a big decision, as well as a stressful, uncertain time. Pressing thoughts about money, family, food, shelter, and the future weigh on one’s mind. So, why would anyone separate from the military if not properly equipped?

Rebranding yourself for the civilian workforce isn’t as challenging as you think.

To prepare for your eventual separation, follows these eight tips to ensure that you are financially ready for your next big transition.

1. Set up a savings account.

Pay yourself first. Always. Aim for saving a minimum of two month’s salary prior to separation. Many companies often take from 30-to-60 days between interviews and starting date, so two months is the minimum. Many financial analysts will tell you to have six month’s salary in reserve, which may be tough to manage, but is a worthy goal.  Be disciplined, start with what you can afford, and don’t stop.

2. Start investing.

A pension alone won’t keep you fat, dumb, and happy. If you contributed to the Thrift Savings Plan, consider your options: Roll it over to a new employer plan, let it ride, or invest with a private company?

Whatever you do, the bottom line is start young, don’t stop. Compound interest and time are your battle buddies. An 18-year-old investing $25 a week, indexed at 2.5% with a return of 8% provides $775,125 at the age of 65. Total investment: $105,251; interest: $669,773. Not a bad return. For the record, there are many theories for the average annual stock market return since the Great Depression. One theory is 10% growth, offset by an average inflation, resulting in an adjusted average growth of 8%. Not to mention, savings plans and 401k accounts often have matching funds, which equates to free money. Who doesn’t like that?

3. Avoid or get rid of unsecured debt.

Many methods exist for reducing your debt, but one proven method is to pay highest interest items first with whatever extra money you can muster. When paid off, add that amount to the next debt, and repeat until you are debt free. No gimmicks, no apps. Be wary of debt reduction agencies. Many are “for-profit” and their efforts benefit them. Some have you pay them vice your lender until the debt is charged off, and then they settle on your behalf, leaving your credit ruined. Don’t do it. Use credit wisely.

4. Invest in a life insurance policy.

While you go through your separation counseling, ensure you understand what your future holds. Servicemembers Group Life Insurance can be converted into Veteran’s Group Life Insurance for a nominal fee; however, if your future or potential employer offers life insurance, then this former option may not be for you. No matter how you acquire the policy, consider your family situation and choose carefully.

5. Consider a survivor benefit plan.

If you have young children or plan to, look into survivor benefit plans for your family. The cost is negligible and ensures that your family receives your pension should you pass on. Plan details and cost are easily found with an Internet search. Your individual situation should determine your course of action as the plan could cost you thousands over your retirement. Before diving in, just be sure the cost is worth the benefit.

6. Get a disability assessment.

I do not advocate seeking unearned benefits, but if earned, press on. In the military, “riding” sick call, frequently visiting the sickbay, or dispensary is frowned upon. However, when separating, those frequent visits could prove crucial in determining a service-connected claim of disability. Service connection is usually granted when a condition is well documented and chronic. If your visits were infrequent with no persistent problems, the issue could be deemed acute, not chronic. Therefore, if you suffer from a chronic malady, seek treatment often and ensure it is well documented. Upon separation, the Department of Veterans Affairs or a service member advocate can assist with substantiating your claims.

7. Prepare for tax season.

When you retire, the Department of Defense’s Finance and Accounting Service assumes that your pension is your sole income and taxes your pension appropriately. Thus, when you file at the end of your first year separated (assuming you’re working elsewhere), you have a W-2 form and your 1099-R from the government. That first year is an eye opener. Chances are you will owe money. Therefore, I highly recommend a tax calculator, available online, to ensure you don’t get caught short in April.

8. Don’t let an ex-spouse affect your pension.

The DoD’s Finance and Accounting Services applies state laws and divorce decree property settlements appropriately upon your retirement. Contrary to popular belief, there is no federal law mandating that you lose a portion of your pension, but if you have an ex-spouse, and part of your pension was awarded to him or her during divorce proceedings, you will more than likely be stuck in that arrangement for life. Remember, each state is different and the laws of each state apply. Judges can, and do, mandate different amounts based on guidelines and circumstances. My advice: Consult with an attorney so you know what the reality is. As well intentioned as your peers are, seek an expert opinion.

What you need to remember is that millions have transitioned before you, and survived. There is life after the military, and it is good. You’re more prepared than you know, just use good common sense and ask us greybeards.

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