JUNE 5, 2026 – There are typically about 95,000 to 110,000 retirements from the military in a given year, as service members conclude careers that have often spanned more than two decades, crossing the 20-year service threshold required to access military retirement benefits. These retirements tend to steadily occur as the year rolls on; however, they often see a large surge each year during the month of June, as summer takes hold.
Though retirement is usually viewed as the “finish line” after years of service and sacrifice, the reality is that it is only the beginning of a brand new chapter. A chapter that, while exciting, can bring about major financial, lifestyle and emotional challenges for veterans, their spouses and their children. It may sound like a relaxing transition, but if not properly prepared for, it can be a very destabilizing experience.
The more you are aware of the forthcoming challenges, the better you can proactively mitigate them.
Financial literacy is a crucial piece of the transition to civilian life, as veterans are entering an entirely new financial operating environment. Most military families have spent 20+ years organizing their financial habits and expectations around a compensation structure that looks very different from the one they will be encountering in a civilian career. Military compensation comes with unique tax advantages, allowances and benefits that have no direct civilian equivalents, making it difficult to accurately determine how much income you will need to maintain your family’s current lifestyle after leaving the military.
Taxes are usually one of the biggest surprises for recent retirees. In my years working with military families, and as a military spouse whose husband retired from service three years ago, I have seen many retirees struggle with the tax difficulties around combining their military retirement pay with their new civilian employment income. Veterans often discover that they owe hefty tax bills because they did not totally understand how retirement pay and civilian earnings would impact their tax situation. But it usually is not an issue of financial irresponsibility, but instead, simply not being robustly familiar with how dramatically different civilian compensation can be from military pay.
Thankfully, you can plan ahead to dodge these pitfalls. First, retirees should review their tax withholdings through the Defense Finance and Accounting Service (DFAS) right when they start receiving their retirement pay, as insufficient withholding is usually the culprit behind unexpected tax bills. Second, you should familiarize yourself with employer-sponsored 401(k) plans. Contributions to these plans help build long-term retirement savings and can also reduce taxable income in the present. Finally, families should establish a household budget that they can realistically commit to long-term; if it is not something your family will be able to reliably adhere to then it will not end up being of much use. Major financial stress can be reduced by simply sticking to the budget day after day, especially when the transition to civilian life usually comes with all sorts of financial changes like new employment, moving and new insurance, to name only a few.
Make sure financial planning is a family conversation during this time of change. Military spouses are often the ones who have been managing the household finances throughout deployments, relocations and career interruptions, making them intimately familiar with the relevant needs and costs that come with your family’s day-to-day life. Open discussions about income expectations, spending priorities, savings goals and plans for the future help ensure that everyone is on the same page.
But there’s more to retirement planning than just monthly income and expenses. One of the key decisions retirees and their spouses will make together involves the Survivor Benefit Plan (SBP), which directly impacts both current retirement income and long-term financial security for the family. It’s paramount to understand the cost of coverage, how premiums affect taxable retirement income and the protection the program provides to surviving spouses and children. The coverage is relatively inexpensive for children and can provide lifelong protection if a child becomes permanently disabled; it creates a crucial layer of financial security for a family.
Another key component of the civilian transition is the matter of life insurance. After losing their Servicemembers’ Group Life Insurance (SGLI) coverage, most retirees naturally assume that the Veterans’ Group Life Insurance (VGLI) is their best option from there on out. But VGLI premiums can get very expensive over time, thus it’s important to fully consider all of your insurance options, as there may be others that are a better fit for your situation by providing more affordable long-term coverage. Additionally, many military spouses also lose their coverage under Family SGLI during the civilian transition; make sure your new plan properly covers your spouse to ensure your family receives proper financial protection.
Amid this major life transition, the children of retirees are deeply impacted by all the ongoing changes as well. Military retirement may bring about a family relocation which means a new school and needing to integrate into a new community, which can be extremely difficult for children. Kids also will need to adjust to their parent being home more consistently after many years of military obligations. These aren’t inherently negative changes, in fact, they can turn out to be wonderful. But, if not handled with care and open communication, they can be very destabilizing to a child’s life
When building a career in the military, it can be hard to find time to prepare for what life will look like when it ends. The families that navigate the tricky transition to civilian life the best are often the ones who enter the process with a plan and a robust understanding of the challenges ahead. It may not make the transition perfect or seamless, but it can really help to smooth out some of the big life bumps that come with military retirement.
By Sarah Roder, Director of Partnerships at Armed Forces Mutual