While establishing goals for 2017, military members have critical decisions to make this year that could have huge implications to retirement planning and savings. Military retirement reform became law in November 2015 and takes effect officially on Jan. 1, 2018.
How does the new law impact military members?
The new law creates big changes for how retirement compensation is structured.
It will ultimately pay out smaller pension checks but also includes cash contributions to individual investment accounts. Similar to 401(k) contributions, the plan offers a limited retirement benefit for those that retire before their 20 year service anniversary.
The good news and bad
While this benefit creates some retirement savings for military members who retire before year 20, the evaluation of the plan by financial experts is less than favorable. Specifically, the lump-sum cash payouts of the new plan reduce your ability to grow additional savings you will need throughout the rest of your life. With that in mind, you’ll want to utilize additional savings methods outside of what the Department of Defense provides to have adequate retirement savings in place.
What is the best path for military members to save for retirement?
The complex financial world we live in presents a huge amount of confusing information. Each strategy for maximizing your retirement savings comes with a mountain of information and it can often become overwhelming to select the right path.
Each military family we work with is unique. With different goals, opportunities, and challenges, a customized approach is the best way to achieve your full financial potential. The Financial Service representatives at AFBN can help you determine the best retirement savings strategy by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources. Start 2017 off on the right foot by reaching out to one of our Service Center locations for help.
Free Tax Prep and Filing for Active Duty Military
What better way to kick off the new year than with a FREE Tax Prep and Filing by one of our Certified Tax Specialists? We help thousands of military families each year save money on their taxes.