What Will Be My Retired Life?
Transitioning from military service to civilian life is one of the biggest changes a service member will face. For those considering early retirement, there’s an added layer of complexity: Are you financially prepared to retire? Beyond calculating pensions, benefits, and savings, retirement means understanding the life you want to lead and ensuring your financial resources match those aspirations.
Let’s dive into some of the critical questions to ask yourself and considerations to keep in mind as you figure out if you're ready to retire and what retired life could truly look like for you.
1. What Does Your Retirement Look Like?
Your retirement vision will set the foundation for how much money you need. Retirement can look different for everyone, so it’s crucial to paint a clear picture of your ideal lifestyle.
Here are some contrasting lifestyle examples:
A Quiet, Rural Life: Are you planning to homestead on a small piece of land, growing your own food, and living a simple, low-cost life in the countryside? Your financial needs might be modest in this case. Aside from the initial purchase of land, ongoing costs could be relatively low.
Luxury and Travel: On the other hand, if your dream involves owning a yacht and enjoying champagne parties on the French Riviera, or frequently traveling the world, your retirement expenses will be significantly higher. Think about the cost of maintaining multiple homes, hiring staff, and flying first-class.
As extreme as these examples are, they help highlight how important it is to define your personal vision of retirement. Most retirees will fall somewhere between these two lifestyles, so it’s important to be honest with yourself about what you truly want.
2. Do You Know Your Fixed and Variable Expenses?
Start by identifying your baseline costs: housing, food, utilities, and healthcare. These costs will vary depending on where you live and what you choose to prioritize.
Housing: Will your mortgage be paid off by the time you retire? If not, consider how much you’ll need to cover your mortgage or rent payments. Also, factor in property taxes and insurance.
Healthcare: As a military retiree, you may have access to TRICARE, which can cover some costs, but consider additional medical expenses that might arise as you age, such as long-term care or supplemental insurance.
Entertainment & Leisure: This is where lifestyle choices have a significant impact. If you enjoy dining out, attending events, or taking vacations, you’ll need to allocate more to leisure expenses.
By categorizing these into fixed (necessary, recurring) and variable (discretionary, changing) expenses, you can create a clearer picture of your budget.
3. How Will You Cover Healthcare Costs?
Military retirees often have access to TRICARE, but there may be gaps in coverage that need to be addressed, especially as you age. Long-term care, vision, dental, and prescription medications are all considerations that could add to your financial requirements.
If you’re considering living abroad, like in France or another country, understand how your healthcare coverage will work internationally. Healthcare costs can vary significantly depending on where you live, so it’s essential to plan accordingly.
4. What Income Sources Do You Have?
Start with the basics—your military pension, if applicable. Then, review any additional streams of income:
Retirement savings: Have you contributed to the Thrift Savings Plan (TSP) or other retirement accounts like IRAs or 401(k)s? Know how and when you’ll access these funds, taking into account required minimum distributions (RMDs) and tax implications.
Passive income: Do you have rental properties, dividends from investments, or other sources of passive income? Having additional streams of revenue outside your pension will give you flexibility.
VA Disability Compensation: If applicable, VA disability payments can be a significant source of tax-free income in retirement. Make sure your claims are up to date and any changes in your health are reflected in your rating.
Each of these income sources should be mapped out alongside your projected expenses to determine if you can sustainably cover your cost of living for decades to come.
5. How Much Debt Do You Have?
Carrying debt into retirement can put a serious strain on your financial resources, especially if you’re living on a fixed income. Consider paying off high-interest debt—like credit cards or personal loans—before you retire. You might also want to work on paying off your mortgage if you can, so housing costs are minimal in retirement.
If you still have debt as you approach retirement, plan for how you’ll manage these payments.
6. What Is Your Contingency Plan?
Life is unpredictable. Unexpected expenses, health issues, or changes in the economy can affect your financial situation. Having a contingency plan is essential.
Emergency Fund: Maintain a well-funded emergency account that can cover 6–12 months’ worth of expenses.
Insurance: Ensure you have adequate life insurance, disability insurance, and long-term care insurance. These safeguards will protect you and your family from unexpected financial burdens.
Flexibility: If the market takes a downturn or expenses are higher than expected, are you willing and able to adjust your lifestyle? Could you return to work part-time, downsize your home, or cut back on travel?
7. Where Will You Live?
Where you choose to live in retirement will greatly affect your cost of living. Consider the following:
Cost of Living: Taxes, housing, and general expenses vary widely by location. If you’re planning on retiring abroad, research the cost of living in your destination, including taxes, healthcare, and housing costs.
Proximity to Family: Do you want to live near family or in a community with other retirees? Having support networks nearby can improve your quality of life but may also come with higher housing costs if you’re looking to live in high-demand areas.
Rural vs. Urban: Rural living may offer a lower cost of living but may also come with fewer services, amenities, and healthcare options. Urban living, while convenient, could have higher expenses.
8. Are You Emotionally Ready?
Retirement isn’t just about finances—it’s also about mindset. For military members, transitioning from the structured, mission-driven life of service to civilian life can be a difficult adjustment. Some questions to consider include:
Do you have a plan for how you’ll spend your time?
Are you comfortable with the change in identity?
Many retirees find meaning through part-time work, volunteering, hobbies, or spending more time with family. Whatever your vision, it’s important to think about how you’ll fill your days with purpose.
Final Thoughts
Planning for retirement is more than just running numbers—it’s about understanding what kind of life you want and ensuring your finances can support that vision. For military members, the transition into civilian life adds a unique set of challenges and benefits. By asking yourself the right questions and planning ahead, you can ensure that your retirement is fulfilling, sustainable, and aligned with your goals.
