Retirement Planning Strategies for Veterans

African American Patriot with flagVeterans and service-members approaching retirement age may need to take a slightly different strategy to financial planning relative to their civilian counterparts, factoring in time spent in the service, pensions, and other available benefits.

Career military servicemembers who serve 20 or more years are eligible for a pension that includes annual cost of living adjustments and typically amounts to roughly half their active duty paychecks.

But veterans who don’t log a full 20 years in the service (only about 17% do, according to Department of Defense data cited by the Washington Post) walk away without a pension, and that’s where retirement planning for veterans doesn’t differ substantially from civilians.

Even if someone completes a full 20-year career in the military, he or she could be as young as 37 when eligible for retirement. For some, that leaves a long period of time for which to prepare.

A top concern of military families is the ability to retire comfortably, at 55% of those without a financial planner, according to the First Command Financial Services Military Financial Behaviors Index for the first quarter of 2014, compared to 49% of those with a financial planner.

“The same planning applies to both veterans and civilians: Start planning early,” advises Nicole Mayer, AIF, partner at Illinois-based financial planning firm RPG-Life Transition Specialists. “Make sure you and your spouse understand any veterans pension that you may receive.”

Low-income veterans can qualify for a VA pension: For example, low-income wartime veterans may qualify for the Supplemental Income for Wartime Veterans pension through the Veterans Administration (VA). To be eligible, a veteran must have at least 90 days of active duty service, and at least one of those days must have been during a wartime period.

Veterans must also meet one or more of the following conditions, in addition to the minimum service requirement:

  • Be age 65 or older
  • Be totally and permanently disabled
  • Reside in a nursing home and receive skilled nursing care
  • Receive Social Security Disability Insurance
  • Receive Supplemental Security Income

However, there are limits on how much income a veteran and his or her family may have in order to qualify for the supplemental income pension, set by Congress each year. In 2014, a veteran with one dependent must have a yearly income less than $16,569 in order to be eligible, according to the VA. If that veteran is receiving the Aid and Attendance benefit, he or she can have yearly income up to $25,022.

“There can be estate planning done called Asset Protection Trusts that might help you qualify for benefits sooner if you have too many personal assets,” notes Mayer.

Assisted living benefits are available, too: Veterans and survivors who are eligible for a VA pension may also qualify for the Aid and Attendance or Housebound benefit: additional monetary payments for veterans who are housebound, or those who need caretaker assistance (veterans cannot receive the two benefits at the same time). The Aid and Attendance benefit can be used toward nursing home and even assisted living care.

Military spouses can get benefits, too: Let’s say Todd entered the service at age 18 and retired at age 38, having started a family along the way. Considering that U.S. women’s life expectancy is about 5 years longer than that for men, according to the Organization for Economic Cooperation and Development (OECD),Todd’s wife may outlive him—but she may also be eligible for certain veteran benefits even if he predeceases her.

That’s why another important step to take is to ensure all documents are in order as applications to receive various benefits and pensions typically require full documentation of service, says Mayer.

“Make sure that your spouse knows where all of your discharge papers and military records are,” she says. “Your spouse qualifies for benefits like Aid and Attendance even if you are no longer living.”

With the average life expectancy for Americans at about 78 in 2013, according to the OECD Todd from the example above would have about 40 years of retirement, making the need for careful planning similar to a civilian counterpart.

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