Your Financial Life After Military Service: Tips for Veterans’ Consideration

Wealth Management

For many U.S. veterans, leaving military service can require major adjustments, both personally and financially—whether it’s moving to a new city, starting a new career, or managing basic needs, such as housing, once provided by the military. Getting a handle early on your money situation, and the benefits available to you, can help ease the transition, as you plan for a financially stable future.

Navigating civilian life can feel uncertain at first because you’re used to the military mapping out your career and milestones, providing the coordinates you need to be successful. But when you get out, it’s up to you to decide the path you want to take. Having a plan for your financial needs and obligations is often essential.

“Since leaving the Navy, I budget everything down to the penny, including bills, entertainment, holiday travel and long-term goals,” says Jared Chaffee, Executive Director of Fusion Response at Morgan Stanley and a Navy veteran who co-chairs the firm’s Veterans Employee Network Group (VENG). “Knowing how to manage personal finances is crucial. It allowed us to save for my daughter’s school, and not having that clarity or understanding around personal finances can makes those decisions more difficult.”

Every year, some 200,000 veterans hang up their uniforms to return to civilian life.¹ Three months after leaving the military, just 40% of veterans had made a successful transition financially. After three years, the number rose to 48%.²

To help veterans in this realm, Morgan Stanley’s Financial Foundations Program for Veterans provides pro-bono financial education and training to interested veterans’ organizations. Taught mainly by Morgan Stanley Financial Advisors who are military veterans themselves, the VENG-run program offers the basics in personal financial management, including budgeting, debt management, retirement and financial planning and investing.

Here are some useful financial management tips for your consideration:

Before Your Discharge

You’ll likely have lots of tasks to take care of in the last few months before your service ends. Make sure these steps are on the list:

• Boost your savings.  Only half of military members say that they have enough funds set aside to cover three months of expenses in case of an emergency.¹ If you’re among those without a solid rainy-day fund, now’s the time to consider increasing your emergency savings. Once you leave the military, you’ll need to cover the cost-of-living expenses, like housing and health care, on your own. Emergency savings can provide you with a cushion if, for example, you need a little extra time to find that new job.

 

• Build a budget. Taking time to estimate your post-military income and expenses can show you areas where you might need to cut back. Don’t know where to start? Consider a “50-30-20” budget, where you spend 50% on what you need (for example, rent and groceries), 30% on what you want (like entertainment and vacations) and you save or invest 20% of what you earn. Once you’ve created a budget, you’ll have a roadmap that can help you make smart day-to-day decisions about money, while also planning for the future.

 

• Remember to take advantage of your benefits. Use the resources available through your Transition Assistance Program), a federal initiative aimed at easing the transition from military to civilian life. Benefits include career coaching and employment preparation.

 

Getting Started in Your Civilian Life

As you adjust to your first year as a civilian, keep these considerations in mind to help you stay on the right financial path: 

• Prepare for tax sticker shock.  As a service member, you may have only been paying federal taxes on your base salary, while taking home your allowances for housing and subsistence tax-free. Once you start working for a new employer, you’re going to have to pay for housing and food with post-tax dollars, meaning you may need to earn a higher salary to take home an equivalent amount of money. 

 

• Consider your health insurance options. While you may not be able to keep the same TRICARE insurance you had during your service, the military does offer some transitional health insurance programs(opens in a new tab) that can cover you for up to 180 days after discharge. Compare those transitional benefits to potential employer health plans from your new job, or through your spouse’s employer, and pick the best one for you.

 

• Avoid debt pitfalls.  Consider factoring any new debt payments into your budget and plan to avoid credit-card and other high-interest debt, if possible. The Military Lending Act limits the amount that a creditor can charge active service members, but not all those protections apply after you’ve left active duty, so be sure to remain cautious about any new credit offers. If you have existing high-interest debt, focus on paying that down before taking on additional debt.

 

• Take advantage of your benefits. Your veteran status gives you access to a range of financial benefits that can help you during this transition (and in the future). Those include access to the Veteran and Military Transition Center(opens in a new tab), which helps those in transition find employment, training or apprenticeships in high-skilled jobs. 

 

Looking Ahead

As you settle into civilian life, it’s important to keep an eye on your finances and retirement savings—and to take advantage of the military benefits that you’ve earned.

• Save for retirement. Consider participating in your workplace 401(k) plan as soon as you’re eligible and contributing at least enough to get any available matching contribution from your employer. You may be able to roll your military Thrift Savings Plan balance into your 401(k) account. If your employer’s plan doesn’t allow for rollovers, you may be able to keep your retirement savings in the federal military Thrift Savings Plan or you may consider rolling them into an individual retirement account (IRA), a tax-advantaged way to help build your retirement nest egg, in addition to your 401(k) plan saving. Keep in mind that cashing out your Thrift Savings Plan account balance, may result in an early withdrawal tax penalty if you’re under age 59 and a half.

 

• Take advantage of your benefits related to …
  • Education: If you’re applying to college or graduate school, be sure to consider how GI Bill benefits(opens in a new tab) may help you cover the cost; in some cases, dependents, such as the surviving spouse or children of a veteran, may receive educational assistance through a GI Bill program.

   

  • Buying a home: When buying a home, keep in mind your potential eligibility for VA Home Loans(opens in a new tab), which may allow you to get a mortgage without a down payment and with limited closing costs.

   

  • Retirement: The U.S. Department of Veterans Affairs (VA) provides a needs-based, tax-free Veterans Pension(opens in a new tab) to wartime veterans over age 65 (or receiving disability benefits), for which you may qualify if you served for at least two years and were called to active duty. You may also have access to nursing-home care or community living centers through the VA.

   

 

Becoming a civilian after years in the military can feel overwhelming, but a few smart financial moves can help set you up for success down the road. And, you may not have to make this transition alone. Email us to learn more about how Morgan Stanley’s Financial Foundations Program for Veterans can help your veterans’ organization. 

Footnotes:

¹ https://www.gao.gov/products/gao-24-107352

² https://www.psu.edu/news/social-science-research-institute/story/evaluating-quality-civilian-transitions-post-9-11-veterans

³ Military Family Advisory Network, 2021 Military Family Support Programming Survey, https://www.consumercredit.com/debt-resources-tools/military-veterans/the-facts-military/veteran-debt-statistics/