DoD Retirement Planning Tips
Five-year retirement preparation has gotten complicated with all the financial decisions, benefit elections, and life planning choices flying around. As someone who spent years counseling service members through their pre-retirement planning windows, I learned everything there is to know about what actually matters in those critical five years before you take off the uniform. Today, I will share it all with you.
Understanding Your Retirement System
Five years out is the perfect time to thoroughly understand which retirement system governs your pension and how it calculates your benefits. The High-3 system uses your highest three consecutive years of base pay, while the BRS combines a reduced pension multiplier with TSP matching contributions. That’s what makes early planning endearing to us experienced service members—you have time to optimize your position rather than discovering problems during terminal leave.
Calculating Your Benefits
Probably should have led with this section, honestly. Run retirement calculators using multiple scenarios—your current rank, potential promotions, different retirement dates. The difference between retiring as an E-7 versus E-8 can amount to hundreds of dollars monthly for life. Five years gives you time to position yourself for promotion or decide if staying longer makes financial sense.
Consider both immediate benefits and long-term value. Your pension adjusts annually for inflation through COLAs, so today’s calculation compounds over a 30+ year retirement. Small differences now become substantial amounts over decades.
Maximize Thrift Savings Plan (TSP) Contributions
Five years before retirement represents your final push to maximize TSP contributions. If you’re under BRS, ensure you’re contributing at least 5% to capture the full government match—that’s free money you can’t leave on the table. If you’re under High-3 without matching, maximize contributions if possible to build your nest egg.
Review your asset allocation annually. Five years before retirement is when you start gradually shifting from aggressive growth to more conservative preservation. Don’t dump everything into the G Fund overnight, but begin transitioning your portfolio to reduce volatility as you approach your retirement date.
Leverage Financial Literacy Resources
The DoD offers excellent financial literacy programs through Military OneSource, your installation personal financial manager, and TAP classes. Take advantage of these free resources early—don’t wait until your final year when you’re overwhelmed with out-processing requirements.
Schedule consultations with financial experts who understand military retirement systems. They can help you optimize your TSP strategy, plan for taxes, and coordinate your various benefit programs.
Plan for Healthcare Needs
TRICARE coverage in retirement differs significantly from active duty healthcare. Research TRICARE Prime versus TRICARE Select to understand which option works better for where you’ll live in retirement. Prime requires living near a military treatment facility but offers lower costs. Select provides more provider flexibility but higher out-of-pocket expenses.
Factor TRICARE premiums and out-of-pocket costs into your retirement budget. Many service members are shocked when they see their first TRICARE retiree premium bill because they’re accustomed to active duty healthcare being essentially free.
Create a Post-Retirement Budget
Build a realistic post-retirement budget five years out so you can adjust your savings and spending patterns now rather than scrambling later. Your expenses will change dramatically—no more BAH or BAS, but you’ll need housing and food money. No more free active duty healthcare, but TRICARE retiree premiums are much lower than civilian insurance.
Include anticipated costs for travel, hobbies, relocation, and emergency expenses. Account for inflation over your retirement timeline. Update your budget annually as your plans evolve and circumstances change.
Consider a Second Career
Most military retirees pursue second careers rather than fully retiring. Five years out is when you should start researching career options, building civilian networks, and identifying any additional education or certifications you might need. That’s what makes early planning endearing to us transition-savvy veterans—you have time to position yourself rather than desperately job hunting during terminal leave.
Leverage veteran employment services and start networking on LinkedIn. Attend industry conferences in your target field. Consider SkillBridge internships during your final months to test potential career paths while still receiving military pay.
Understand Tax Implications
Military retirement pay is subject to federal income tax, but state taxation varies dramatically. Some states completely exempt military retirement, while others tax it as ordinary income. This difference can save you thousands annually depending on where you live.
Consult with tax professionals experienced in military retirement to optimize your strategy. Understand how TSP withdrawals, VA disability compensation, and civilian employment income interact for tax purposes.
Stay Informed
DoD retirement policies evolve through legislation and regulatory changes. Join veteran organizations like MOAA that track policy updates and advocate for retiree interests. Subscribe to DoD newsletters and follow authoritative sources for accurate information.
Staying informed helps you make timely adjustments to your retirement plan and ensures you don’t miss beneficial changes or new programs.
Seek Professional Guidance
Probably should have led with this section, honestly. Working with financial advisors who specialize in military retirement provides tremendous value. They understand the unique aspects of High-3 versus BRS, TSP withdrawal strategies, SBP decisions, and how VA disability compensation affects your overall financial picture.
Look for Certified Financial Planners (CFPs) with military retirement expertise. Consider fee-only advisors who charge for advice rather than earning commissions on products—this eliminates conflicts of interest.
Join a Support Network
Connect with other service members who are preparing for retirement or have already retired. Veteran organizations, online forums, and installation retirement seminars provide valuable support and practical advice from people who understand your unique situation.
These networks offer camaraderie during a significant life transition and help you avoid common mistakes others have already made.
Review and Update Estate Plans
Five years before retirement is the perfect time to comprehensively review your estate planning documents. Update your will to reflect current wishes, designate powers of attorney for financial and healthcare decisions, and verify all beneficiary designations on your TSP, life insurance, and future retirement accounts.
Beneficiary designations supersede your will, so keeping them current is critical. I’ve seen too many cases where outdated designations sent TSP balances to ex-spouses or deceased parents because the service member never updated their paperwork.
Explore Housing Options
Will you stay in your current area or relocate in retirement? This decision affects your budget, tax situation, access to base facilities, and quality of life. Five years gives you time to research options, visit potential locations, and understand cost of living differences.
Consider proximity to military installations for commissary and exchange access, quality healthcare facilities, state tax policies, and cost of living. Factor housing costs including property taxes, insurance, and maintenance into your retirement budget.
Manage Your Debt
Five years provides sufficient time to eliminate high-interest debt before retirement. Develop an aggressive debt repayment plan targeting credit cards and personal loans first. Retiring debt-free dramatically improves your financial security and reduces the income you need to maintain your lifestyle.
Avoid accumulating new debt during your final years of service. Every dollar you owe when you retire is a dollar your pension has to cover.
Understand Survivor Benefits
The Survivor Benefit Plan (SBP) provides 55% of your retirement pay to your spouse after you die. Without SBP, your pension stops the month you die. Five years out is when you should thoroughly research SBP costs and benefits with your spouse.
That’s what makes SBP endearing to us married retirees—it ensures your spouse maintains income security even after you’re gone. The cost runs about 6.5% of your base amount, but it’s government-backed insurance that can’t be cancelled and adjusts with COLAs.
Evaluate Your Life Insurance Needs
Your life insurance needs change as you approach retirement. If you have Servicemembers’ Group Life Insurance (SGLI), understand your options for converting it to Veterans’ Group Life Insurance (VGLI) after retirement. Compare VGLI premiums with civilian term life insurance to find the best value.
Consider whether you need life insurance at all once you’re receiving retirement pay and your dependents are grown. If you elect SBP, additional life insurance may be unnecessary.
Consider Volunteer Opportunities
Volunteering provides purpose, social connections, and meaningful activity in retirement. Research organizations that align with your interests and values. Many groups specifically value the leadership and organizational skills that military retirees bring.
Building these connections before retirement eases your transition by providing immediate engagement when you take off the uniform.
Stay Physically Active
Retirement removes the mandatory PT and fitness standards that kept you relatively healthy during your career. Develop sustainable fitness routines now that you can maintain in retirement. Join gyms, find workout partners, or commit to activities you genuinely enjoy.
Staying physically active improves your quality of life and reduces healthcare costs throughout your retirement.
Mental Health Maintenance
Probably should have led with this section, honestly. Retirement affects your identity and daily purpose as much as your finances. Military service provides structure, clear missions, and automatic camaraderie. Retirement removes all of that.
Plan ahead for this adjustment by identifying new sources of purpose and connection. Utilize mental health resources available through TRICARE or VA if you struggle with the transition. It’s normal to feel lost initially—preparing for this reality helps minimize its impact.
Family Involvement
Include your family in retirement planning from the beginning. Your spouse needs to understand how your benefits work, particularly TRICARE enrollment, SBP decisions, and beneficiary designations. Discuss your plans and aspirations together to align expectations and build support.
Retirement affects your entire family, not just you. Making it a joint planning process prevents conflicts and ensures everyone is prepared.
Maintain Legal Documents
Organize all essential documents—personal identification, legal papers, financial records, military service records. Create a system for storing and accessing these documents easily. You’ll need them for filing taxes, accessing benefits, and proving your military service.
Request copies of your complete military medical records before you retire—you’ll need them for VA disability claims.
Financial Emergency Fund
Build an emergency fund covering 6-12 months of expenses before retirement. This safety net prevents you from raiding your TSP or taking on debt if unexpected expenses arise. Five years provides ample time to accumulate this cushion through consistent saving.
Utilize Military Discounts
Familiarize yourself with military discounts available to retirees. These savings on travel, retail, dining, and services can significantly stretch your retirement budget. Always inquire if veteran or military discounts are available—the savings compound substantially over time.
Continued Education
Consider educational opportunities to expand your skills for second careers or personal enrichment. Use your GI Bill benefits if you haven’t already, or explore free courses many institutions offer to veterans. Lifelong learning keeps you mentally engaged and can open new opportunities.
Five years before retirement represents your critical planning window. Use this time to optimize your TSP, eliminate debt, research housing options, build civilian networks, update legal documents, and prepare mentally for the transition. That’s what makes early preparation endearing to us successful retirees—you have time to get everything right rather than rushing through decisions during your final chaotic months. Start planning today to secure your future.
