01.31.2022 By Breanna Johnston, AFC® Candidate & Amelia Simons, Communications Coordinator at America Saves

6 Steps To Jumpstart Your Retirement Journey When You’re Military.

Retirement is one of those endeavors that fall into the “someday” category. When living your day-to-day life as a servicemember or military family and you’re in your 20s, 30s, and even your 40s and those everyday expenses pop up, it’s more difficult to save for something that is seemingly so close, yet so far away.

Written by Breanna Johnston, AFC® Candidate and Amelia Simons, Communications Coordinator at America Saves.

6 Steps To Jumpstart Your Retirement Journey When You’re Military.

Retirement is one of those endeavors that fall into the “someday” category. When living your day-to-day life as a servicemember or military family and you’re in your 20s, 30s, and even your 40s and those everyday expenses pop up, it’s more difficult to save for something that is seemingly so close, yet so far away.

In today’s economy, we can’t overlook the fact that there are many military families not making a living wage beyond paycheck to paycheck, especially at high cost of living duty stations where even COLA isn’t enough, making it difficult to save.

However, for those of us with the ability to save, it’s important to understand that it’s never too late to start saving for your retirement. Your future self and family will thank you! So what are the steps to take when you’re ready to jumpstart your military retirement journey? Glad you asked! Here are our six steps below.


1. Get in the “Retirement Ready” mindset.

You went your whole career adopting Military Readiness, the ability to fulfill assigned missions and tasks. Well, retirement is no different. Let’s think of retirement as just another form of readiness.

The first step is getting in the right mindset, meaning making your new savings goal a priority. We encourage you to “Start Small, Think Big” and take advantage of the retirement solutions available to you like your TSP, Federal Military Retirement Benefits, or even IRA options that you can open on your own. 

If you’re starting your retirement savings journey early, you have time on your side! However, if you’re closer to military retirement, then prepare to be a bit more aggressive in order to achieve your retirement goal. Research how to make catch-up contributions to your retirement savings, ultimately jump-starting a stalled plan. 

As day to day expenses or emergencies arise, it is important to remember that saving anything is better than saving nothing. Even increasing your retirement savings by one percent can make a huge difference in the long run. 


2. Define what retirement will look like for you and your family.

Your retirement years will be as individual as you are! Have you visualized how you’d like your retirement to look and feel? Think about where you want to settle down. Will you stay put or do you intend to continue to travel far and wide every few years? Most importantly, how much “annual income” will you need to achieve this envisioned lifestyle? Asking yourself these questions will help determine a rough estimate of how much to start saving now. 

Someone who plans to travel and or have an active lifestyle when they retire from the military may need to save more than someone who has a home that is paid off with no grand plans of world travel.

You will also need to consider exactly when you want to retire, permanently. Will your military retirement allow you to fully retire or will you need to pick up another career path prior to your end of enlistment? Will your spouse take on a full time roll to supplement your annual income now that all of the kids are in school? This will help determine how much you should be saving annually. In the civilian world, people pre-retire, half-retire or even never leave the workforce at all.


3. Calculate how much you’ll need to save.

Once you have an idea of what type of retirement you want to have, estimate the annual retirement income needed. You want to ensure you are saving for the future you want. Most service members are not putting enough money into their retirement fund every year in order to afford the life they want for themselves and their families when they transition back to the civilian way of life.

What each service member and family needs will vary widely based on a number of factors, including your current age, the age at which you plan to retire for good, if your partner or spouse has an income, your spending habits, and different sources of retirement income. There are also circumstances beyond your control, like how long you can expect to live based on family history.

While there is no hard and fast rule to determine how much to save by a specific age, many personal finance experts recommend having saved an amount equal to your annual salary by age 30, three times by age 40, and five times by age 50. While this can be overwhelming if you haven’t hit those milestones in your retirement savings yet, one small step you can take is to increase your contribution rate with each annual pay raise or every time you reach the next rank in service. Remember, building a savings habit and taking control of your finances, like you’re doing now, is worth celebrating.


4. Take the Military Saves Pledge.

Now that you have a better idea of what exactly you’re saving for and how much, it’s time to consider how you’ll achieve your dream retirement. The America Saves Pledge is a tool that helps you make a simple plan to meet your savings goal while offering you long-term accountability and support along the way. Take the Military Saves Pledge and visit MilitarySaves.org for tips, resources, and support on your journey towards military retirement. Remember: servicemembers who make a plan are twice as likely to save successfully!


5. Cover Your (Financial) Bases.

As a military member, you don’t have access to 401k plans in the way a private sector employee would. But that doesn’t mean you don’t have options. The military offers two types of retirement accounts- a Thrift Savings Plan (TSP) and Federal military retirement benefits.

The TSP is a federal retirement plan offered to eligible government employees, including military personnel. TSP accounts are similar to a 401(k) plan, meaning  that the military member can elect to make contributions to them from their base pay, with the minimum contribution being 1% of base pay.

For Federal military retirement benefits, there are two retirement plan options for military service members. They are the Legacy Retirement System (LRS) and the Blended Retirement System (BRS). The plan you're enrolled in and the benefits you enjoy depend on when you enlisted in the armed services, so make sure you understand which plan you’re enrolled in and the retirement benefits gained from it. 

Another option you have is an Individual Retirement Arrangements (IRAs), and you can open one anytime through financial institutions or financial services providers. There are several different IRAs including the most common: Roth and Traditional. Roth IRAs can be withdrawn at any time without penalty and are tax free. Traditional IRAs may be tax-deductible and your earnings grow tax-deferred until you start making withdrawals. You’ll need to determine which is best for you — or maybe a combination of both. The IRS has put together a great comparison tool to understand the differences between the two accounts and decide which may be better for you.


6. Prioritize making your contributions automatically.

Now that you can visualize the type of retirement you want, have determined approximately how much you’re saving for, and have a support plan in place, the best thing you can do is to set it and forget it! Set up automatic payments and contributions either through the military to your TSP or from your financial institution to deposit into an IRA each month to stay on track.

The point of a retirement savings is to keep it invested for the long term. This means avoiding dipping into your retirement fund for emergencies. Instead, create an emergency savings that you are also contributing to consistently.

Research by the Employee Benefit Research Institute shows that it typically takes 13 years or more of contributions to an account before you begin to reach a level of savings that is enough to fund a number of years of retirement as a supplement to Social Security. So don’t become discouraged if you feel you do not have enough savings in your retirement fund just yet.

Whatever path you choose to take toward retirement, the biggest step to take is being consistent. Retirement savings is a long-term commitment, but today’s work will pay off in the long run, literally. Take the Military Saves Pledge and let us help you reach your goals, no matter what they are. Your future self and family will thank you!

Are you trying to save money? Let Military Saves help you reach your savings and debt reduction goals. It all starts when you make a commitment to yourself to save. Take the first step today and take the Military Saves pledge to save money, reduce debt, and build wealth over time. And it doesn’t stop there. Military Saves will keep you motivated with information, advice, tips, and reminders to help you reach your savings goal. Think of us as your own personal support system.