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Category: Estate Planning

How Should you Prepare for Military Retirement?

Around 1.3 million people serve in the U.S. military; more than 800,000 are part of the reserves.[i] More than 2 million Americans are considered military retirees.[ii]

Upon retirement, many military retirees will receive 50% of their final salary for the rest of their lives, and the system allows various service members to retire around the age of 40. The U.S. military’s pension system is considered one of the most generous in the nation.[iii]

In its 2015 fiscal year, the U.S. military paid veterans $57 billion in pension benefits, which is nearly 10% of the service’s annual budget.[iv] Even though military pensions are generous, meeting the requirements to qualify for benefits can be challenging. Only 17% of service members stay long enough to qualify for retirement benefits.[v]

Service members are eligible for pensions after serving active duty in the U.S. Army, Navy, Air Force, or Marine Corps for at least 20 years. They may also qualify for pension benefits if they retire for medical reasons from the service.[vi]

While the commitment to the military’s mission, the service’s professional training, and the more regimented workplaces may differ from the civilian world, everyday life is similar.

Service members sleep in regular beds, shop at the same stores, and conduct business at the same banks (or credit unions) as civilian workers. However, the transition to civilian life can be trying.

If you or someone you know expects to retire soon from the military, read these four financial tips to prepare for the transition.

Look at your budget.

Life in the military provides a level of financial stability. If you lived on base, you may have taken some expenses, such as for clothing, health care, and housing, for granted.

While pension checks may fill some of the void, you still have to monitor expenses you may have ignored while in the service. Car payments, rent or mortgage payments, and clothing costs may place an unanticipated burden on your budget.

Veterans are also eligible to receive savings and discounts on services, but few take advantage of the opportunities. Using some of the veterans’ discounts can save you money and put more cushion in your budget. Go to https://militarybenefits.info/military-discounts/ to learn more.

What about taxes?

You paid taxes on your military income while you were in the service, and your pension payments are also taxable as income on the federal level.[vii] States have their own taxation rules; some don’t tax pension benefits while others do. The tendency for many retirees is to move to a state that doesn’t tax military pensions, which might be a mistake, analysts warn.[viii]

You should consider other factors, such as cost of living and other taxes and fees, before making your decision. By doing the math you can find a place to live (and work) to fit your needs and budget during your retirement.

Filling the life insurance gap.

Once you leave active duty, you and your family members lose the Servicemembers’ Group Life Insurance (SGLI).[ix] You have one year and 120 days to apply for Veterans’ Group Life Insurance (VGLI), which doesn’t require medical exams. However, if you apply after 240 days, you’ll be required to respond to health questions and may be subject to a medical examination. Your maximum coverage equals the SGLI coverage amount you had during your service. You may apply for lower amounts in $10,000 increments. You may also increase your coverage by $25,000 every five years to a maximum of $400,000, until age 60.[x]

Learn about retirement benefits.

While the military’s pension benefit is an attractive incentive, service members should learn the specific retirement plan that’s available to them. Eligibility depends on your enlistment date.

Service members who entered the military:

  • Before September 8, 1980 are eligible for the military’s Final Pay retirement system.
  • Between September 9, 1980 and July 31, 1986 may receive the High 36 system.
  • Between August 1, 1986 and December 31, 2017 are eligible for the REDUX system.[xi]

To learn more about developing a financial strategy to suit your retirement needs, contact us at 800.929.1001.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] http://www.governing.com/gov-data/military-civilian-active-duty-employee-workforce-numbers-by-state.html

 

[ii] https://www.statista.com/statistics/217354/forecast-number-of-military-retirees-in-the-us/

 

[iii] https://qz.com/929153/only-one-in-five-people-take-up-this-incredibly-generous-pension-to-retire-at-40/

 

[iv]https://comptroller.defense.gov/Portals/45/documents/cfs/fy2015/13_Military_Retirement_Fund/2015_MRF_AFR_Final_20151110.pdf

 

[v] https://qz.com/929153/only-one-in-five-people-take-up-this-incredibly-generous-pension-to-retire-at-40/

 

[vi] https://www.dfas.mil/retiredmilitary/plan/eligibility.html

 

[vii] https://www.military.com/money/personal-finance/taxes/taxes-on-military-disability-and-retirement.html

 

[viii] https://www.kiplinger.com/article/saving/T065-C000-S003-smart-money-moves-if-you-are-leaving-the-military.html

 

[ix] https://www.benefits.va.gov/insurance/sgli.asp

 

[x] https://www.benefits.va.gov/insurance/vgli.asp

 

[xi] http://www.military.com/benefits/military-pay/the-military-retirement-system.html

Why You Still Need Goals-Based Planning in Retirement

Why You Still Need Goals-Based Planning in Retirement

Before you retired, you may have spent time developing strategies to help you reach your retirement goals. You might have invested for the income you would need, minimized your debt, or protected yourself with long-term-care insurance. By focusing on your financial goals and envisioning the lifestyle you wanted for that next stage in life, you were able to build a path toward retirement.

Now that you are retired, you are no longer setting long-range goals because you’ve likely reached your destination, right? Not quite.

Each stage in life requires new goals and strategies, and retirement is no different. Here are some reasons why goals-based planning can still help you build the life you enjoy, even in retirement.

Your New Reality May Not Be What You Expected

The Employee Benefit Research Institute found that fewer than half of retirees say that their retirement is very enjoyable, no matter their economic status or gender.[I]

As you prepared for this phase of life, you may have envisioned your dreams of a leisurely lifestyle coming true. But as reality set in, you found the life you once imagined is not what you are experiencing. If this is true for you, you can still make the most of your retirement by acknowledging how you’re feeling and identifying the necessary steps to revamp your perspective and experiences.

Ask Yourself these Questions:

  • What exactly do I feel unhappy about? And what am I able to change?
  • What have I been unable to achieve so far? And what are the roadblocks?
  • What lifestyle changes can I make? What can I change now to make my life different?

You May Need New Lifestyle Goals

The average retiree in America will spend 18 years in retirement.[ii] Before you retired, you had to focus on the goals that would help you retire comfortably; now you may need to look at how you want to spend your time.

If you have reached retirement and found yourself feeling disappointed or disillusioned, you can make changes. You can start revamping your lifestyle by identifying ways to enhance your enjoyment and deepen your engagement in the long term.

Ask Yourself these Questions:

  • Are there any new hobbies I would like to pursue?
  • What volunteer opportunities could increase my community involvement?
  • Should I get a part-time job, and what new skills can I develop to support my search?

Ultimately, every stage in life brings new experiences and fresh priorities. Just because you spent years working to ensure you could afford retirement doesn’t necessarily mean that the planning and preparation stops once you retire. Of course, your unique financial situation and life values will drive how goals-based planning can help you in retirement.

If you’d like to explore how to strengthen your goals and better ensure you live your best retirement life, feel free to contact us.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] http://time.com/money/4383981/retirement-3-ways-isnt-boring/

http://time.com/money/4308089/retirement-happiness-satisfaction-study/

[ii] https://www.thebalance.com/average-retirement-age-in-the-united-states-2388864

 

Thy Will Be Done

“Daddy, what happens when you die?” Yep, I got the question every God-fearing father wants to hear from his young son. And when it comes, it’s usually when you’re least expecting it. And of course, you pray that you’ll handle it as well as your father handled it and as well as his father before him. And not long ago, it happened to me. Just walking through the park one Saturday morning.  As you can imagine, I’d been preparing for this talk for years. Not breaking his gaze, I knelt down, took his hands in mine and told him what we all know to be true:

“Well son, with a properly written will, your estate will be distributed in accordance with your wishes – not at the discretion of the state.”

And there it was, with the full weight of truth. He was so moved by my response, apparently, he could only manage an inquisitive, “Huh?”   Bless his heart, I thought, he’s at a loss for words. As was I. It’s not every day someone asks about estate planning. But it should be. So now let me ask you, what’s going to happen when you die? Still not hitting home? How about this:  Who will take care of your young children? What will happen to your assets? To whom will they go? Some of you are so sharp and so on top of things, you had the answers to these questions before you finished reading them. But let me be more specific, are those wishes recorded in your will? No? I had a boss once tell me, “I’m not interested in what you say you’re going to do, I’m interested in what you’ve done.”   Write a will. It’s as close to having a voice after you’re gone as you’re going to have.

5 reasons why you should have your will in place:

  1. You get to decide who’ll take care of your children – or to put it another way – you decide who won’t.   (OR…you could just forget about the will and leave it up to the court. After all, kids are resilient, I’m sure they’ll be fine.)
  2. You get to decide how your estate will be distributed. (OR…forget the will, save the money, and just let your family duke it out. It’ll be a nice distraction from the grief.)
  3. Because as life changes, so can your will. (Change your mind? Then change your will.)
  4. You diminish the chance for legal challenges. “But mama told me she wanted me to have the __________ .“ (Insert object of potential/likely family conflict here.)
  5. A will protects against a potentially lengthy probate process. Whether you have a will or not, your estate will go through the probate process. The will serves as your “instructions” to the court. (And we all know how well things turn out without instructions.)

There are several other reasons, too, ranging from possible estate tax implications to the naming of an Executor who will handle the affairs of your estate once you’re gone. But if you could get past the first two without a pain in the pit of your stomach, then none of the rest will likely mean anything to you. But if a chord was struck as you read this article, please look into it.  It doesn’t have to be Shakespearean, but it will have to be signed. And that’s easier to do while you’re alive.   And afterwards, when someone asks you what happens when you die, you’ll have two potentially great pieces of news for them.

Give us a call. We can help.

Billy McCarthy is a Wealth Manager with CapSouth Wealth Management in Dothan, Alabama.

Contact Billy at 334.673.8600 or  http://capsouthwm.com/our-team/billy-mccarthy/

Investment advisory services are offered through CapSouth Partners, Inc., an independent Registered Investment Advisory firm, dba CapSouth Wealth Management. Nothing contained in this article is intended as, nor should be construed as, an individual investment recommendation.

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