How to Plan For Military Retirement

Military retirement planning can seem like a daunting task. Determining how much money you need to retire is like trying to predict the future. Coming up with a precise number is nearly impossible, and that’s okay. An educated estimate can set you on the right path to future financial security. Learn how to plan for military retirement by coming up with an estimate of your retirement income needs and maximizing your benefits.
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Man using a calculator and holding money to save for retirement in his other hand.

It seems like such a daunting task. The mountain climb to the summit of retirement is quite the hike, with many obstacles that can send you tumbling down the trail.

Knowing you might need to save $1 million, $5 million, or more can make saving for retirement seem impossible.

This is why the earlier you begin planning for retirement, the better. In fact, military members should start planning as soon as possible since, by itself, a military pension might not be enough money for retirement, especially for Reserve Component members, who may be retirement eligible close to age 40 but may have to wait until age 60 to receive retirement pay.

Whether you’re planning to use a military retirement plan or shifting to the civilian sector, the following tips can help you understand how to plan for retirement and maximize your military benefits.

Step 1: Determine Your Retirement Income Needs

When your retirement date is several decades away, it can be challenging to know your future income needs. You have to estimate future lifestyle requirements, factor in inflation, rising TRICARE costs and health expenses, and various other factors.

Still, an educated guess can serve as a helpful saving guide. We’ve created an example you can easily adjust based on your information.

If you want to maintain a similar quality of life in retirement as you have now, start by using your current income and then adjust for inflation.

Inflation erodes the purchasing power of money over time, meaning that the same amount of money won’t buy the same goods and services in the future as it does today. This impacts the ability to maintain your standard of living during retirement.

Calculate Inflation Adjusted Income

You can use the following equation to adjust your current yearly income for inflation:

Inflation Adjusted Income = Current Yearly Income * ((1 + Inflation Rate)^Number of Years to Retirement)


You currently make $50,000 per year, you have 20 years before retirement, and the projected rate of inflation is 3%. 

You would calculate $50,000 * (1.03 ^ 20) = $90,305 (rounded). 

This means that accounting for inflation, you will need to plan for approximately $90,305 per year to maintain the same standard of living in 25 years as you enjoy now. To put this in perspective, say you retire at 50 and expect to live until 85. You would need to save approximately $3,200,000 to maintain the same standard of living until death. 

Remember, this number is only valid if you wish to uphold the same quality of life that you currently maintain. Many retirees have lower income needs because their children can support themselves, or they decide to downsize their home.

Keep this in mind when you’re calculating your future retirement needs.

Step 2: Account for Retirement Accounts and Investments

You also need to account for your retirement income, such as Social Security benefits and your military or private pension(s). Once you have this number, subtract it from your projected annual income of $90,305.

For example, if you anticipate your military pension and Social Security Benefits to be worth $50,000 per year. You would subtract $50,000 from $90,305 to find how much additional savings you will need to maintain your future quality of life. In this example, you would need an additional $40,305 per year.

Remember to factor in all forms of retirement and investment income you will have access to. Military members have access to the Thrift Savings Plan (TSP), similar to a civilian 401(k) plan.

Like a 401(k) plan, the TSP offers military members a way to make tax-deferred investments – meaning you don’t have to pay taxes on earnings or contributions until the funds are withdrawn. There is also a Roth version of the TSP, giving military members another retirement account option.

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.

Step 3: 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 can earn enough service time to gain another pension from a private company or a different government organization. The possibility of multiple pensions, in addition to Social Security Benefits, can significantly increase your quality of life in retirement and potentially allow you to retire more quickly than 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 a Roth 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 comfortable quality of life in your retirement years.

Step 4: 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, and more. There are also unique ways to save, like retiring in a state with income tax exemptions on military retirement pay.

It is highly recommended to meet with an accredited veterans benefits advisor in your local area who can help you better understand what benefits are available to you and how to qualify and apply for those benefits.

This guide covers a few basic assumptions and should only be 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 should 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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