Planning for Retirement from the Military – How to Account for a Military Pension

Planning for retirement can be difficult, whether you are retiring from a military position, a civilian position, or a combination of both. However, career military members may have an added benefit most civilian sector employees do not – the opportunity for two retirements: one from the military and one from the civilian workforce. This dual…
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Planning for retirement can be difficult, whether you are retiring from a military position, a civilian position, or a combination of both. However, career military members may have an added benefit most civilian sector employees do not – the opportunity for two retirements: one from the military and one from the civilian workforce.

This dual retirement option provides veterans with a unique situation when determining how to save for retirement. The following tips can help military veterans adequately save for retirement from their military and/or civilian careers:

Determine Your Retirement Income Needs

Trying to figure out your annual income needs when you will be 65 years old can be challenging when your retirement date is still several decades away. You have to factor in your future lifestyle requirements, rising TRICARE costs and other rising health expenses,  inflation, and various other factors.

Even though you might not be able to get an exact number, you can still come up with a rough idea that can act as a saving guide. Here is one method to manually determine how much you need for retirement:

Determine future income needs

If you plan on having a similar quality of life in retirement as you have now, then start by using your current income requirements, then adjust for inflation.

Let’s look at an example and you can adjust these numbers based on your income and requirements (and don’t worry about knowing how to do the math, you can just copy and paste the equation into Google’s search engine and Google’s calculator will give you the results quickly and easily). You can also use free online retirement calculators to run some basic retirement planning calculations.


Today’s income requirement is $45,000 per year (median US Income is roughly $45,000), inflation will be 3%, and you have 25 years before retirement. You can use the following equation to adjust for inflation:

Inflation Adjusted Income Requirement = Today’s required income * ((1 + inflation rate)^ Number of years to retirement)

Inflation Adjusted Income Requirement =$45,000 * (1.030 ^ 25)

Inflation Adjusted Income Requirement = $95,000 (rounded up)

Next, account for future retirement income

Using the assumptions above, you will need approximately $95,000 per year in retirement to maintain the same standard of living in 25 years as you enjoy now. But that doesn’t mean you need to save enough money to withdraw $95,000 per year from your retirement accounts.

You also need to account for your retirement income, such as Social Security benefits and your military or private pension(s). Be sure to take into account what these benefits might be worth in the future, not the present-day value. Again, we are dealing with a 25-year time frame, so use your best estimate.

Once you have this number, subtract it from your annual living requirement of $95,000. For example, if you anticipate your military pension and Social Security Benefits to be worth $50,000 per year, you will need to come up with an additional $45,000 per year, not the full $95,000. Also, keep in mind that you can increase your social security requirements if you wait longer to begin receiving benefits.

Account for additional retirement accounts and investments

Many people have other retirement accounts such as an IRA, Thrift Savings Plan, or 401k. This money will also work toward your retirement and should be accounted for when you make your retirement calculations. Be sure to keep in mind any other investments you may have, such as rental properties and other investments held in taxable investment accounts.

Determine your remaining retirement income needs.

Once you have a good idea of how much you will earn from your pensions, retirement accounts, and other investments, you can subtract these numbers from your annual income requirements to get a better idea of how much more money you need to save for retirement. This will be your savings goal.

Start Retirement Planning Early

The earlier you begin planning for retirement, the better. In fact, military members should start retirement planning early, since a military pension might not be enough money for retirement by itself.

Military members have access to the Thrift Savings Plan (TSP), which is similar to a civilian 401(k) plan. Like a 401(k) plan, the TSP offers military members a way to make tax-deferred investments. There is also a Roth version of the TSP, giving military members another retirement account option.

TSP members can make withdrawals from their TSP during retirement, or they can roll their TSP into an IRA when they retire or otherwise separate from the military. This gives TSP members more long term flexibility in managing their investments.

Maximize Post-Military Employment and Investments

Many military members are eligible to start earning a military pension in their late 30’s or early 40’s, which is young enough to begin a post-military career.

In some cases, veterans are able to earn enough service time to gain another pension from a private company or from a different government organization. The possibility of dual pension plan incomes, in addition to Social Security Benefits, can greatly increase your quality of life in retirement and potentially allow to retire more quickly than you anticipated.

Even if you aren’t able to receive another pension from your post-military employment, you can do your best to increase your savings in retirement accounts such as the TSP if you remain in government service, or through an IRA or 401k. Contributing as much as you can to these retirement accounts will help provide you with the retirement income you need to maintain a nice quality of life in your retirement years.

Finally, Take Advantage of All Benefits Available to You

There are a variety of state and federal benefits available to veterans, including health care, base and commissary privileges, educational benefits, homestead exemptions, and more.

It is recommended to meet with a veterans benefits advisor in your local area who can help you better understand which benefits might be available to you, and to help you better understand how to qualify and apply for those specific benefits.

*A few notes: This article covers a few basic assumptions and should only act as a rough guide for do-it-yourself investors. It is highly recommended that you meet with a professional financial planner before making the final decision to retire. If you are younger you might find it helpful to meet with a financial planner every few years to ensure your retirement plan is on track.

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  1. Ron Sliga says

    Turn 64 next month and beginning to think more about final retirement. I am retired USAF E-9, retiring in 1998. Continued working in the casino industry since military retirement. Small 401K plan which I used to pay off all auto debt. Wife and I have saved over the years and Blessed with inheritances from both families. We will have over $500K accumulated in savings, stock and mutual funds. Wife just took early Social Security at 62–$713 a month. My SSAN will be just over $24K annually if I wait until 66.2. May keep working a bit longer. Only debt we have is new house mortgage. We think we are pretty well set to enjoy a comfortable retirement with little to no change in lifestyle. We enjoy the simple home life, friends and family, travel a little and I plan to give back a bit with some volunteering. Any words of wisdom?

    • Ryan Guina says

      Hello Ron,

      It sounds like you have a good plan going right now. But it never hurts to have a professional review your current retirement plan to help you determine if there are any holes in the plan. A financial professional can help you look at your income and expenses, your current retirement savings, and other factors to help you make sure your retirement goes as smoothly as possible.

      Best wishes!

  2. Pat S says

    Great step by step guide. It can be a heck of a transition, judging by my peers who have begun to transition. Some into retirement, others into civilian life in general.

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