Maximizing Savings in Retirement: Essential Tips for Veterans

As Memorial Day approaches, we take time to recognize our brave military members and veterans, and their contributions to protecting our freedom and safety. We must also acknowledge that as many veterans transition into retirement, managing savings effectively is crucial for maintaining financial stability and achieving long-term goals. With careful planning and strategic decision-making, both veterans and active-duty military members can optimize their savings for retirement to enjoy a comfortable and fulfilling life post-service. Below are some essential tips to help veterans make the most of their savings: 

Stay Informed About Benefits:

Understand eligibility requirements and timing considerations for claiming Social Security benefits. Explore resources provided by the VA, military organizations, and financial advisors specializing in veteran affairs. Continuously assess eligibility for benefits and take advantage of programs designed to support veterans in retirement. Delaying benefits beyond full retirement age can result in higher monthly payments, providing a valuable source of additional income in retirement. Explore Social Security claiming strategies to maximize lifetime benefits. 

Explore Healthcare Benefits:

Explore healthcare benefits through the Department of Veterans Affairs (VA) and discover coverage options, including VA healthcare facilities, TRICARE for Life, and Medicare. Research long-term care insurance options and consider setting aside funds for future medical expenses. By leveraging available healthcare benefits effectively, veterans can reduce out-of-pocket expenses and safeguard their retirement savings.

Maximize Retirement Accounts:

Take advantage of retirement savings options such as the Thrift Savings Plan (TSP), Individual Retirement Accounts (IRAs), and employer-sponsored plans. Contribute the maximum allowable amount, especially if eligible for catch-up contributions. Explore investment options within these accounts to align with retirement goals and risk tolerance. 

• Thrift Savings Plans: TSPs are a federal retirement plan offered to eligible government employees, similar to 401(k) plans. Military personnel are automatically enrolled once they have served for 60 days but have the ability to opt out. Those who do not opt out have 3% deducted from each paycheck. They also have the ability to make contributions from their base pay at a minimum of 1%. TSPs may limit investment to a specific range of mutual fund or similar options.
• IRAs: For 2024, military personnel may contribute up to $7,000 to traditional or Roth IRAs. Those 50 and older may also contribute an additional $1,000 catch-up contribution. Roth IRAs offer tax-free withdrawals in retirement, while traditional IRAs may be tax deductible.

Savings Accounts:

Military members have additional methods to save, including the Savings Deposit Program (SDP), military savings accounts offered by banks or credit units, and taxable investment accounts.

• Savings Deposit Program: The SDP is offered to qualified active-duty military members who are serving in an eligible combat zone, as well as members who have been deployed for a period of 30 days or one day within each of 3 consecutive months. Military members may save up to $10,000 in an SDP account and earn a 10% interest rate compounded monthly. The money is returned to the service member once deployment ends.
• Military Savings Accounts: Savings accounts offered by banks and credit unions include money market accounts, CD accounts, and deposit accounts offered to military members and their families.

Diversify Investments:

Spread investment assets across diverse asset classes such as stocks, bonds, real estate, and other investment vehicles to minimize risk and heighten returns. You may consider a brokerage account to increase diversification. However, be aware that earnings in a taxable brokerage account are subject to capital gains tax. Periodically review and rebalance investment portfolios to ensure alignment you’re your retirement savings goals.

Manage Debt:

Prioritize debt repayment to reduce financial burdens in retirement. Focus on high-interest debts such as credit cards and personal loans, utilizing surplus income and windfalls to accelerate payoff. Avoid accumulating new debt and adopt disciplined spending habits to maintain financial stability. 

Plan for Legacy and Estate Planning:

Develop a comprehensive estate plan to protect assets and ensure a smooth transfer of wealth to heirs and beneficiaries. Consult with legal professionals specializing in estate planning to draft wills, trusts, and advance directives. Consider charitable giving strategies to support causes important to veterans and leave a lasting legacy. 

By adopting a proactive approach to retirement planning, veterans can make the most of their savings and enjoy a secure and fulfilling life post-service. With careful consideration of financial goals and resources, veterans can confidently embark on a smooth transition to a comfortable retirement.