Financial Resources
How to Create — and Stick to — a Budget in the Military
No matter your rank, creating and sticking to a budget while serving will ensure you make the most of your military salary.
Apr 20, 2023 | 8 min. read
Preparing For Your Retirement
Financial Planning For Military Retirement
Developing a Military Retirement Strategy
The pursuit of financial security.
Many of us dream about retirement: taking leisurely vacations, volunteering our time, or even launching a small business. Our Advisors are specialized in financial planning for military retirement. They can help you develop a strategy that will ensure you pursue the retirement lifestyle you've always dreamed about. Our Financial Advisors will explain tax-advantaged investment options, establish a plan that leverages military retirement benefits, and meet with you regularly to monitor your progress and make necessary adjustments.
The new military Blended Retirement System is more complicated and less guaranteed than the old system. That means it will be more important than ever for service members to make smart, informed decisions at every step of their careers in order to be successfully prepared for the future.
Individual Retirement Accounts
Helping you save for the future.
IRAs are investment vehicles with particular tax advantages that can help you save for retirement.
Traditional IRA
Provided you meet the eligibility requirements, a traditional IRA offers the immediate benefit of tax-deferred contributions. It also provides the long-term benefit of a tax deferral on earnings. This means you pay no taxes on your investment earnings until you begin making withdrawals, which is usually after you retire and are in a lower tax bracket.
Roth IRA
Contributions to a Roth IRA are not tax deductible, but if you meet certain requirements all earnings are tax-free when you, or a beneficiary, withdraw them.
SEP-IRA and SIMPLE-IRA
SEP (Simplified Employee Pension) and SIMPLE (Savings Incentive Match Plan for Employees) plans offer tax advantages that help small business owners, their employees, and self-employed individuals save and invest for retirement.
Annuities
Providing a steady stream of income.
Annuities offer two distinct retirement-planning benefits: They can provide a guaranteed stream of income1 and don’t require you to pay taxes on earnings until you begin withdrawals in retirement (withdrawals made prior to age 59 1/2 may be subject to a tax penalty).
Common Retirement Planning Questions
How much money do I need to retire?
That depends… on a lot of factors. Like how long you plan to work, what you want to do when you retire and how long you’re going to live! Obviously, it’s not possible to provide specific answers to all of these Questions. That’s why our Advisors work with you to develop a strategic framework to identify and implement solutions that are customized to meet your needs. First Command’s Retirement Income Distribution planning process can help you manage financial risks, generate sustainable income, and assist you in the pursuit of your retirement income goals.
Are TSP contributions enough for retirement?
Only if retirement is your only goal, since you cannot access the money in your TSP without a tax penalty until you are 59 ½ years old. The TSP is an outstanding, low-cost resource for retirement investing and you should, at minimum, invest the 5% of your paycheck necessary to earn the maximum matching contribution. But if you have goals like buying a house or sending your children to college, other investments may be more appropriate.
How do I know whether to choose Roth or Traditional contributions?
It depends on a variety of circumstances. Part of the difficulty in choosing which contribution method is best for you—and whether it’s better to part with tax dollars today or defer them until a later time—arises from the unknown future of income tax rates, both from a policy level and the individual rate that will apply to your situation.
Here are some broad considerations that may help you decide which type of TSP or 401(k) contributions are best for you:
- If you’re in a lower tax bracket today (low income, temporarily enjoying a lower tax filing status, high deductions, etc.) and suspect that you’ll be in a higher tax bracket later, then Roth contributions may be more beneficial in the long run. This is generally true for younger people in the early stages of their earning years.
- If you’re in the later earning stages of your career and in higher tax brackets due to income, loss of deductions, etc., and believe you’ll be in a lower tax bracket during retirement, then traditional contributions to your TSP or 401k may be more beneficial.
Should I choose SBP coverage when I retire?
Since military retirement pay stops after the death of the retiree, electing the Survivor Benefit Plan (SBP) at retirement is the only way a service member can continue to contribute a portion of their retirement income to surviving family members. While there are both pros and cons to SBP, First Command believes enrollment is the right choice for the majority of retiring service members. It’s important to realize, however, that the SBP replaces just 55% of the base amount. In most cases, it will need to be supplemented with other sources of income, such as life insurance, investments and Social Security. A First Command Financial Advisor is well-equipped to you help sort through these factors.
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Tools & Advice
- Guarantee depends on the claims-paying ability of the issuing insurance company.