Financial Planning for Military Transitions

By Barbara O’Neill, Ph.D., CFP®, boneill@njaes.rutgers.edu

Family gathered in the kitchen
Picture by August de Richelieu from Pexels

The Military Families Learning Network Personal Finance team recently held a webinar called Financial Planning for Transition: Train-the-Trainer. Included was discussion of the Transition Assistance Program (TAP), the military transition timeline, adult learning theory, civilian equivalent salary calculations, income taxes, living expenses, health insurance, credit cards, debt-to-income ratios, spending plans, and more.

Below are seven take-aways from the webinar for Personal Financial Managers (PFMs), including government agency resources to share with military families:

  • TAP Helps Service Members Transition– TAP is a Congressionally-mandated program with interagency agreements between the U.S. Departments of Defense (DoD), Education (DoE), Veterans Affairs (VA), and Homeland Security (DHS), Small Business Administration (SBA), and Office of Personnel Management. TAP provides training and tools to prepare service members and their spouses for civilian life.
  • The Transition Process Has a Timeline- The TAP Transition Timeline includes action steps for specific ranges of time (e.g., 18-24 months, 90 days or less) before a service member’s separation date. Transition activities can occur as early as 24 months for service members who are retiring and no later than 365 days for those who are separating/transitioning.
  • TAP Has Specific Process Steps– Specific features of TAP include individualized counseling, pre-separation counseling, DoD transition day, VA benefits and services day, DOL overview of employment topics day, two days for a service member-elected track (DoL for employment, DoE for education, SBA for entrepreneurship, and the DOL vocational workshop), and a culminating Capstone event (held no later than 90 days before separation) where commanders verify achievement of career readiness standards.
  • TAP is Grounded in Andragogy– Andragogy refers to techniques used to teach adults. TAP is grounded in Knowles’ Six Principles of Adult Learning with a focus on learners’ internal motivation, self-direction, life experiences, and goals, the relevance and practicality of information, and respect for learners. TAP personal finance topics include basics such as financial goals, income and expenses, and credit and debt.
  • Civilian Equivalent Salary– In the process of determining future education and/or employment options, service members determine their current compensation package (base pay + basic allowance for housing or BAH + basic allowance for subsistence or BAS). They can use the DoD Regular Military Compensation (RMC) Calculator to determine an approximate civilian equivalent based on the zip code of their permanent duty station.
  • Tax and Lifestyle Considerations– While transitioning to civilian life, often in a new geographic location, separating service members must pay attention to federal and state income taxes and property taxes as well as a variety of location-specific living expenses including housing, utilities, transportation, and insurance.
  • Health Insurance Planning- There are specific time deadlines for health insurance under the Transitional Assistance Management Program (TAMP) after separation from active duty. Civilian health care options include a new employer, private insurance company, or Marketplace

In summary, military transitions can be complex but there is an organized process and plentiful resources to help service members determine their “next steps.” For more information, visit this TAP website.