By Claire Wood
So far this year I have been sharing our family’s process of making big financial decisions based on unique factors of military life. In January, that looked like performing a cash flow analysis to create an overview of spending for the year and, in February, I dove into the topic of life insurance. For March, I compared some of the important decision-making factors for renting vs. buying a home each time you PCS.
For April, we are focused on retirement considerations for military families, including our own. We have taken a hard look at our strategies for purchasing our forever land/home as inflation costs continue to impact the real estate market. We are also hopeful to increase our monthly investment contributions once we get through our most recent PCS transition, buying a second vehicle for a teenager, and getting one child settled at college in the fall.
Retirement can feel far away when these immediate and pressing needs to take priority. However, we are determined to keep our retirement quality of life in the mix of our conversations now, too, because it will be here before we know it and we recognize that in order to retire well, we must consider and act to safeguard our future.
Retirement: The Long and Short of It
If you haven’t already, it is worthwhile to dig deeply into the technicalities of what military retirement looks like in terms of percentages, eligibility, and options that servicemembers have within the pension system. There have been important changes over the years and it is the responsibility of the servicemember to track these changes and maintain understanding of their ensuing repercussions.
Currently, there are multiple systems including special considerations for those who retire with medical disabilities. Militarypay.defense.gov is a great resource to educate yourself on the ins and outs of what a servicemember may be entitled to for all scenarios of military retirement.
The broad and overly simple version of military retirement: it is a wonderful financial benefit but it will only render a portion of previous earnings and it’s unlikely that it will be enough to cover the costs of living upon separation from the military. With that in mind, below are four considerations for successfully planning for your future.
1. Dream Together
Whether retirement is right around the corner or seems like it’s still a lifetime away, one of the best things partners in a military marriage can do is dream together about the future. Not only will articulating these hopes and desires allow each person to communicate his or her wishes to the other, it will also begin to set expectations for the future.
Dreaming and having conversations actually doesn’t cost anything, so explore any and all notions of what retirement might look like. Feel like hitting the open road for a year in a recreational vehicle? Want to own a bunch of land in a remote area? Eager to live in your hometown near your family? Will the military spouse get to pick the location based on employment opportunities? Throw it all out there. It’s likely these ideas and dreams will evolve over time, but it can be a healthy exercise for both partners to begin to look forward to life beyond military service.
This exercise benefits both the service member and the spouse as it allows each party to have a safe space for discussing what is important and valuable. As the time draws closer to actually making a plan, having ongoing practice of naming what matters might allow legitimate next steps to unfold naturally.
2. Be Realistic
Now that you and your servicemember have begun discussions about all of the fun and future-oriented options for what retirement may look like, it’s time to also begin thinking more realistically. Sure, I’d love to own a second home in New York’s Upper East Side so I could pop into the Metropolitan Museum on a whim and have a third home right on the beach in Hilton Head, but is this truly realistic? Would my husband, Ryan, enjoy living on his own ranch out in Montana for several months out of the year? Perhaps. Is this legitimately doable? Likely not. We both love a good adventure but we aren’t gazillionaires.
Just because the biggest and most outrageous of our dreams might not happen doesn’t mean we can’t find partial solutions to these hopes and dreams for retirement. What is important is that as the grandiose dreaming continues, so do the conversations about what is more likely and manageable.
For us, that looks like hopefully purchasing some land within an hour’s drive of our families back in Tennessee, putting down some roots in a home that we will enjoy for years to come. Instead of owning NYC apartments, beach houses, or ranches we could be very satisfied planning for regular vacations to these destinations. If Ryan completes a full 20-year career, we are still looking at about eight more years of service, so these plans will likely change, but for now this is kind of our loose, realistic plan.
3. Run the Numbers
At least once a year as Ryan and I discuss our hopes for retirement and life beyond regular PCS moves, new jobs, and constant readjusting to life in new locations, we also aim to run the numbers or look at the financial costs of making our dreams a reality.
How do you run the numbers on a dream? Well, you start by looking at hard data. What location do you plan to settle in? What are average sizes and median prices of homes in that area? How might inflation factor into these numbers? Do you want to be able to purchase a home outright or will you have a mortgage?
If traveling or pursuing a hobby is part of your retirement plan, what kind of budget does an annual vacation that might cost several thousand dollars look like? What would it cost to buy that fishing boat, motorcycle, or build that chicken coop you or your spouse have always dreamed of?
As you begin to get a soft number on the costs of these dreams, it is wise to dig even deeper into the math on these numbers. What will your actual percentage of military retirement translate into monthly? How much beyond that amount will you need to earn to cover costs of home ownership, monthly bills, travel, hobbies, generosity, and more? Will one or both partners continue working in some capacity after retirement?
4. Make a Plan
It can feel really difficult to not only carve out the time for all of this dreaming and calculating but it can also feel demoralizing to realize that as hard as you’re working during your military career, you still might come up short financially thus leading to a less-than-extravagant post-military life.
One of my often quoted lines from Langston Hughes’s poem, “Harlem,” asks the question of “What happens to a dream deferred? Does it dry up like a raisin in the sun?” In full transparency, it can be a hard pill to swallow to consider how many dreams may feel deferred during the military service years only then to feel like they are impossible beyond the military service years, too.
This is where making a plan will save the day! Once you have done your dreaming, adjusting those dreams to make them more realistic, and running the numbers to see the amount of monetary assets you will require, getting a plan together is where you can start actively pursuing your dreams.
Need to set up a monthly ROTH IRA or TSP contribution? Need to set a savings goal each month for a down payment on land? Want to get on a plan to get out of debt? Planning to help your kids with college or wedding expenses?
Thankfully, these aren’t questions that you have to answer on your own. If this feels overwhelming to you, there are trained professionals at places like AAFMAA that can help to make this part of the process a breeze! Take advantage of their handy Military Retirement Guide or their assortment of military focused Wealth Management Services, including financial planning, investment management, and trust services.
AAFMAA can help you to make (and execute) a realistic plan now to begin making smart money decisions ahead of time that will set you up for the retirement you’ve been dreaming of. Thirty-fourth U.S. President and Colonel (Retired) Dwight D. Eisenhower said it best, “Plans are nothing. Planning is everything.”
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