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Know Before You Go
Transitioning Out
Separation & Retirement

- As of April 2020 -

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Whether you and your family have served 4 years or 20+, thank you for raising your hand and serving our country!  According to the Veterans Affairs office, about 200,000 service members transition back into civilian life every year.  Transitioning out of the military can be full of stress and unknowns.  We researched many sources and reached out to recently separated and retired community members to ask them what they wish they knew before and during their transition out.  We hope this helps you as you prepare for the next chapter of your life! 

Our Top 6 Topics

(Select the Title to Expand)

1. Transition Assistance Program

The Transition Assistance Program (TAP) provides information and training to ensure Service members leaving Active Duty are prepared for their next step in life whether pursuing additional education, finding a job in the public or private sector, or starting their own business. (TAP Homepage)

  • The Veterans Opportunity to Work and Hire Heroes Act of 2011 (VOW Act) requires service members separating from the military to attend the Transition Assistance Program (TAP).  

  • In 2013, the U.S. Department of Defense launched a TAP virtual curriculum through their Joint Knowledge Online (JKO) learning management system.  

  • Effective 1 Oct 2019, all Service members transitioning from the military must complete a Congressionally Mandated Initial Self-Assessment or Initial Counseling (IC) within two years of retiring, within 18 months of separating, and not less than 365-days prior of official retirement or separation date

  • Military spouses are highly encouraged to attend TAP with their transitioning Service member.

 

Here are the Service Specific TAP Pages

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TAP - What Members Wish to Stress:

Take It as Many Times as You Need To!

You're allowed to take the TAP class as many times as you want. Take it early on, 6 months out, to get resume tips, job finding leads, and more.  Take it again when you're about a month or two out as a refresher.  There is a lot of info that you'll want that refresher later on

2. Finances

Officer Retirement in Grade

  • For an Active Duty Officer to retire in a grade of O-4 or lower, they must serve at least 6 months in that grade​​

  • For an Active Duty Officer to retire in a grade of O-5 or higher, they must serve at least 3 years in that grade​​

*Note* This is mainly for prestige on what rank is shown on your retirement card. Your retirement pay is based on the program you are enrolled in (i.e. High-36 = average of your last 36 months of service).  Your DD-214 will still state what rank you were when you retired.

Last Paycheck

  • Can be on hold for up to 20-60 days past your normal pay date (For DFAS to audit your account)​
  • Recommend to have 30-60 days of a financial buffer built up before you transition out

Taxes

During active duty, many service members have the opportunity to declare residency in states that waive state-income for AD military.

  • After separation or retirement, you need to be aware of your new state of residency tax rates as this will affect your financial outlook 

  • Some states (i.e. Iowa and Ohio) waive taxes on retired military income

  • You may have to manually calculate how much you owe to said state for the amount of time you left active duty or changed residency.

Example: An AD member declared Alaska residency while in service (no state income taxes). Upon retirement on August 31st they settled in Maryland and changed residency (taxes retired income).  That member will have to pay Maryland state income tax for September-December of that year.

Retirement Pension Programs (Final Pay, High 36, BRS)

  • Active Duty can retire after serving 20 years of service​

  • National Guard & Reserve members can retire after completing a minimum of 20 "qualifying" years of service (creditable retirement years) become eligible for retired pay at age 60.  A qualifying year is a year in which the member earns at least 50 retirement points

 Final Pay

  • For members entered before Sep 8, 1980

  • To Calculate: Basic Monthly Pay at the time of retirement (x) the years of creditable active federal service (x) 2.5% for each whole year of service

  • You get 50% for 20 years of service up to a maximum of 75%

    • After 20 years, each additional month you serve on Active duty provides an additional retired pay multiplier of 1/12th of 2.5% percent â€‹

 

Example: $5,000 x 20 x .025 = $2,500​/month

 High 36

  • For members entered on or after September 8, 1980 and before Jan 1, 2018

  • To Calculate: Number of years you serve (x) Average of your highest 36 months of basic pay (x) 2.5%

  • 20 years x 2.5% =  50% of base pay | 30+ years = 75% 

    • After 20 years, each additional month you serve on Active duty provides an additional retired pay multiplier of 1/12th of 2.5% percent​

 

Example: 20yrs x $5,000 x .025 = $2,500/month

(Assuming the average of your highest 36 months of basic pay = $5,000)

 Blended (BRS)

  • Effective for a all new members after January 1, 2018.​

  • Was effective for past members to "Opt In" from Jan 1, 2018 - Dec 31, 2018​​

  • Note: 83% of people who join the military don't stay long enough to retire. Without the blended program, those members leave with zero government sponsored financial benefits​

  • To Calculate: Number of years you serve (x) Average of your highest 36 months of pay (x) 2.0%

  • 20 years x 2.0% = 40% of base pay | 30 years = 60%​

  • Yes - BRS pension is available right after military retirement

Example: 20yrs x $5,000 x .02 = $2,200/month

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BRS Add On - TSP Matching Contributions: 

  • Begin after 60 days of service

  • Member automatically enrolled to contribute 3% of their basic pay to the TSP each month (You can change or stop this at any time)

  • Member automatically receive 1% government contribution of basic pay to member's TSP account

  • After 2 years of service, the government will match the member's contributions up to an additional 4% on top of the automatic 1% (100% match of first 3% & 50% match up to 5%)

Examples with $2000/month Basic Pay

You contribute 3% + 1% auto + 3% matching = 7% Total​

-Comes Out To-

$60+$20+$60=$140/month​ ($80 match)

OR

You contribute 5% + 1 % auto + 4% matching = 10% Total

-Comes Out To-

$100+$20+​$80 = $200/month ($100 match)

 

  • All government contributions are always Traditional (Tax-Deferred) TSP funds

    • You can elect for your contributions to be Roth TSP funds

  • Matching ends after 26 years of service

  • Age 60 is when you can start withdrawing from your TSP without 10% penalty

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BRS Add On - Continuation Pay Bonus(Taxed)

  • A taxed financial bonus incentive available after about 12 years of active service​

  • Requires a 4 year active duty service commitment 

  • Each service offers a different rate, but the average has been 2.5x (multiplier) of your monthly basic pay at 12 years

 

E-6 Example: An active component E-6 at 12 years of service (YOS) ​($3,874/m) 'get' a $9,685 bonus pre-tax, just under $7.3k assuming a 25% tax

 

O-4 Example: An active component O-4 at 12 YOS ($7,831/m) would 'get' a $19,577 bonus pre-tax, just under $15k assuming a 25% tax

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BRS - Lump Sum Option (Taxed)

  • Instead of the standard monthly retirement payments, you can take a lump-sum payment of either 25% or 50% of your gross estimated retired pay and discount further payments

  • With a 25% lump-sum payment, your monthly retirement pay will be 75% of the normal full retirement pay.

  • With a 50% lump-sum, monthly pension will be 50% of the normal retirement pay

  • *Note* Lump-sum payment is discounted by an amount that changes every year (6.75% for 2020) So, if your total retirement packet is $100,000 (25% lump sum option) you would only receive $93,250​

  • Overall, you will lose out on a considerable amount of your pension with the lump sum option - but it does exist if you need a large amount of cash fast

  • At age 67 your retirement pay goes back up to the full amount.

Veterans Group Life Insurance (VGLI)

Reminder - Servicemembers' Group Life Insurance (SGLI) ends 120 days after your retirement date​

  • SGLI includes coverage of $400,000 with a $24/m premium

  • Extension of 2 years if you are 100% disabled upon leaving the military​

 

VGLI is an extension of SGLI benefits after you get out of the military

  • You must apply for VGLI within 1 year and 120 days of your separation or retirement day

  • To apply after after 1 year and 120 days, you must prove that you're in good health​

  • Premiums go up with age. The following are rates for $400k of coverage as of Feb 2020:

    • Age 30-34 = $40/m

    • Age 40-44 = $68/m

  • You can convert your VGLI policy into a commercial (civilian) policy

Survivor Benefit Plan (SBP)

  • SBP ensures that after the retired military member passes away, their spouse continues to receive 55% of the pension for the rest of their life

  • There is also an option to ​add your children if you and your spouse pass away

  • If enrolled, you pay a monthly premium based on your pension for 30 years

    • Breaks down to 360 payments​

    • 30 years = Vested & No more premium payments

Example of a $3,000/m pension & $200/m premium

$200/m for 360 payments = $​72,000

Spouse's annuity would be $1,650/m or $19,800/year

It would only take 4 years of the spouse outliving the deceased retired member to make the annuity back

​Finances - What Members Wish to Stress:

  • Be aware of your new civilian state income taxes after getting out!

  • Be aware of jumping up a tax bracket if you take the lump sum!

  • The premium for Dental & Vision Insurance through benefeds ​is required to come out of your retirement check

  • VGLI - highly recommended if you leave with serious service related injuries or terminal illness.  However, if you leave in decent health, you may be able to find lower premiums and higher payouts with private insurers.

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3. Medical

Standard Separation

  • To qualify for the 180 days of premium-free health care through the Transitional Assistance Management Program (TAMP) you must meet eligibility.  TAMP eligibility is determined by the Services and documented in the Defense Enrollment Eligibility Reporting System (DEERS).  Your own TAMP eligibility can be viewed online via MilConnect.

    • Involuntarily separating from active duty under honorable conditions including:

      • Members who receive a voluntary separation incentive (VSI), or

      • Members who receive voluntary separation pay (VSP) and aren't entitled to retired or retainer pay upon separation

    • A National Guard or Reserve member separating from a period of more than 30 consecutive days of active duty served for a preplanned mission or in support of a contingency operation

    • Separating from active duty following involuntary retention (stop-loss) in support of a contingency operation

    • Separating from active duty following a voluntary agreement to stay on active duty for less than one year in support of a contingency operation

    • Receiving a sole survivorship discharge

    • Separating from regular active duty service and agree to become a member of the Selected Reserve of a Reserve Component. The Service member must become a Selected Reservist the day immediately following release from regular active duty service to qualify.

  • During TAMP, sponsors and family members are eligible to use one of the following health plan options in addition to military hospitals and clinics:

  • Continued Health Care Benefit Program (CHCBP) is a premium-based health plan managed by Humana Military. CHCBP offers health coverage for 18 to 36 months after TRICARE or TAMP coverage ends. The coverage is like TRICARE Select with similar benefits, providers, and program rules. If you qualify, you can purchase CHCBP coverage within 60 days of losing TRICARE or TAMP coverage, whichever is later

Standard Retirement

Upon retirement you may use standard TRICARE plans until age 65. After 65 you become eligible for TRICARE for Life.

Overall, there is no cost for services received at a Military Treatment Facility (MTF), except for a small per diem for inpatient care.

 

1st: Please use the TRICARE Plan Finder to identify which plan you do/will qualify for for the area you will retire in

 

2nd: Please use the TRICARE Compare Tool to compare cost & cost-shares associated with each plan

 

TRICARE Prime​

  • Only available in "Prime Service Areas"​

  • Enrollment:

    • $300/yr for individual​​

    • $600/yr for family

  • Deductible

    • $0​

  • US Family Health Plan

    • Is an additional TRICARE Prime option​ that connects a network of local community bases, not-for-profit health care facilities (i.e. John Hopkins Medicine for the Maryland/DC area) 

    • You will not get care at military hospitals or clinics when enrolled

 

TRICARE Select

  • Fee-for-service plan

  • Enrollment:

    • $0​

  • Deductible:

    • $150 per individual​

    • $300 per family

 

TRICARE For Life

  • Is a "Medicare-wraparound ​coverage plan (You must enroll in Medicare)

  • 1st Medicare pays its portion

  • 2nd TRICARE pays provider for TRICARE-covered services

  • $0 enrollment fee

  • Premium is based on Medicare Part B Preimums

 

TRICARE Select Overseas

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Dental & Vision

 

After sponsor dies

  • Surviving dependents remain eligible for TRICARE unless spouse remarries or children age out​

Medical Separation/Retirement

Governed by: DoD Directive 1332.18 | DoD Instruction 1332.38 | DoD Instruction 1332.39

 

A member can voluntarily present themselves at a Medical Treatment Facility (MTF) for medical care or a commander can refer the member to the MTF​ for a mandatory medical examination when they believe the member is unable to perform their required duties.

 

To continue the process, the initial MTF examination would recommend a Medical Evaluation Board (MEB).  If the MEB determines a serious medical condition making the member unfit for military service, it refers the member to the Physical Evaluation Board (PEB).  The PEB provides the formal 'fit-for-duty' or disability (0-100%) determination and recommends one of the following choices:

  • Return member to duty with or without medical re-training/job limitations

  • Place on Temporary Disabled/Retired List (TDRL)

    • Disability is not 'stable'

    • Member is unfit for duty and entitled to permanent disability (see medically retire section below) but must undergo a periodic medical re-examination within 18 months and another follow on PEB eval.​

    • TDRL maximum tenure = 5 years.

    • Member can be retained for full 5 years with periodic examinations or a final determination is made​

  • Separate member (Assuming less than 20 years)

    • Without Benefits​

      • Member has less than 8 years of active service and the disability existed prior to service and was not worsened by military duties

    • With Severance Pay (2 months basic pay for each year of service, no more than 24 months)

      • Member has more than 8 years of active service (Applies to pre-existing/hereditary condition) - or - 

      • Less than 30% service connected disability 

  • Medically Retire member

    • Member is unfit for duty with at least 30% service connected disability ​

    • Compensation is the higher of the following: 

      • Disability% x Retired pay base​ (High-36 or BRS)

      • 2.5 x YOS x Retired pay base

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Medical - What Members Wish to Stress:

Be Honest with Your Pains Early!

Set up a medical appointment at least a year out for a doctor to check out anything bothering you that you've been gutting through.  Things like that need to be on your medical record PRIOR to your final physical.  Have a follow up appointment for those same issues as well. This is important to prove 'degradation' of your injuries while on active duty.  Schedule your separation physical early.

4. Terminal Leave/PTDY

  • You can bank up to 60 days of leave per fiscal year***

    • This can be carried over to your following retirement fiscal year to give you close to 90 days ​of terminal

    • ***April 2020 Update*** DoD published a Special Leave Accrual Memo for all Active Service Members

      • Members can accumulate up to 120 days within the effective period of March 11, 2020-Sept 30, 2020​

      • Leave days can be retained through Sept 30, 2023

  • You can sell back the leave, but at 1/30 rate of your basic pay 

    • Not recommended considering when on terminal you get full basic pay + BAH + BAS + full coverage health care

  • You still accrue your 2.5 days a month of leave while on terminal 

  • Retirees and those involuntarily separated are entitled 20 days of PTDY for transition time (30 for those stationed OCONUS)

    • You are authorized to use Space-A travel if needed​

    • PTDY may be taken in conjunction with terminal leave upon completion of all final out processing actions

  • It's important to properly calculate your final leave end date as you cannot 'extend' terminal leave to account for unaccounted days.  

Terminal Leave Calculation Example 

You plan to retire right at 20 years.

Your enlistment or commissioning date was May 15, 2010.

Your earliest retirement date is the 1st of the following month - June 1, 2030.

You bank up the max 60 days of leave by the previous fiscal year (FY) which ends Sept 30th, 2029. 

You can then start accruing past 60 days during the new fiscal year starting Oct 1st, '29.

8 months (Oct-May) of FY'30 leave = 20 days

You are stationed CONUS and so plan to use 20 days of PTDY.

20 PTDY + 60 FY'29 Leave + 20 FY'30 Leave = 100 days

Now work backwards starting and including May 31st: 100 - 31(May) - 30 (April) - 31 (March) = 8 days left to subtract in February 2030

The earliest you can start Terminal PTDY and Leave is February 21, 2030

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Terminal L/TDY - What Members Wish to Stress:

  • Yes, you can work as a contractor while on terminal leave

  • Yes, you can work for the U.S. government while on terminal leave, but...

    • Officers cannot hold state or local government positions

    • You may have to wait the '180 Day Cool Off' period as discussed in DoDI 1402.01 to enter DoD Component Civilian service. 

      • This was ​waived after Sept 11, 2001, but reinstated in 2017

      • This does NOT prevent you from applying for a position

  • Overall, you are still on active duty orders while on terminal leave and must still abide by the same rules such as restrictions on political activities

  • Any questions or concerns should be brought up to your installation legal office (Staff Judge Advocate or Counselor's Office)​

5. Final PCS

Separations

  • The move/travel must be completed within 6 months of separating

  • If under 8 years continuous active time, the government will pay for one final move to (the distance to) your Home of Record (HOR) or Place Entering Active Duty (PLEAD)

  • If more than 8 years continuous active time, the government will pay for your final move to your Home of Selection (HOS) CONUS.

  • The reimbursement rate is calculated from your rank's base allowed weight and allowed distance. Any cost above that will come out of your pocket.

 

Retirement

  • The move/travel must be completed within 12 months of retirement​

  • The government will pay for one final move to your home of selection (HOS) 

  • If you choose to move OCONUS, the personal property office will use the cost of transporting your entire weight allowance to the farthest possible location within the 48 contigious states from our current location​

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Final PCS - What Members Wish to Stress:

If separating, you don't have to go back to your HOR.  However, any mileage costs beyond your HOR distance will come out of your pocket.

6. Skillbridge Program

The DoD SkillBridge program allows you to use the last 180 days of active service (with pay & medical benefits) to gain industry training, apprenticeships, or internships directly with certified industry partners.

Any rank, enlisted or officer, may apply for SkillBridge.  There are many industry partners with opportunities in a variety of fields, such as energy, information technology, manufacturing, retail, transportation, civil service and more. These industry partners have developed SkillBridge programs for separating Service members because they value your expertise, dedication and service.

 

Go to the SkillBridge Locations Map to learn about existing opportunities.

 

Skillbridge - What Members Wish to Stress:

You Can Set Up a Connection with a Company Not On the List if They are Willing to Sponsor You!

Other Resources

The following is an excellent "Retirement Planning 12 Month Countdown" road map created by Kirk Windmueller.  He also provides an excellent first hand account of lessons learned during his transition out.  Read more on his LinkedIn Page Here

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(Select the Image Below for a PDF Copy)

Militar Retiremet Roadmap
podcast.JPG

Also, a few podcasts that we enjoy are:

Veteran on the Move: Empowering Veterans Through Entrepreneurship

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Borne the Battle: Sponsored by the Dept of Veteran Affairs

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The Military Money Show

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Mentors for Military

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​DROP and Give Me 20

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We would love your feedback or further insight on this topic!

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