Military finances can be complicated enough. But if you’re a reservist, you have to navigate two systems at once: the military system and the civilian system. You may end up planning for retirement while trying to take into account your years of active duty, your years in the reserves, and your years of civilian work. While every reservist’s situation is unique, there are a few basic things to know about financial planning as a military reservist.
Life in the Reserves
There are two main paths to becoming a reservist. Some enter from the civilian side, hoping to gain military training and benefits. Others transition to reserves after their active-duty service.
Joining the reserves is a much smaller commitment than signing up for active duty. You’ll have to drill one weekend a month and do an annual training two weeks a year. This may require using your vacation from your civilian job.
You will be paid for your service and advance in rank over time. Of course, since you serve a small minority of the time, you won’t earn as much as active-duty military do. Your civilian job will have to cover most of your expenses.
And, of course, in the event of a national emergency or war, you may be activated and deployed. Whatever you have going on in your life at that time will have to be set aside. This is generally not voluntary. However, if you want an active duty posting, you can also volunteer for one.
Health Insurance
While active duty military will normally use military healthcare, reservists often use a civilian health insurance plan. If you have health insurance through your civilian employer, this might be the cheapest option for you. However, qualifying reservists can also participate in TRICARE Reserve Select, which is a health insurance plan specifically for reservists.
You can purchase TRICARE Reserve Select coverage at any time during the year. You’ll need to pay a monthly premium and meet a deductible. It can cover both you and your family. You can see any TRICARE-authorized provider.
If you’re called up for active duty, you can be eligible for full TRICARE coverage. You’ll need to be activated for at least 30 consecutive days. This coverage comes at no cost to you.
Retirement Planning
Retiring as a military reservist is particularly complex, especially if you also have periods of active duty. The main way reserve retirement is calculated is with points. You earn points by completing various activities, such as a day of active service, a training assembly, or a correspondence course you completed. If you earn 50 points in a year, that counts as a qualifying year for retirement. Twenty qualifying years makes you eligible for military retirement.
However, unlike active duty servicemembers, you can only retire after you turn 60. This can be reduced if you’ve been mobilized over 90 days since 2008. Your actual retired pay is calculated with a formula taking into account your base pay, your years of service, and your number of points. Years of active duty earn you 365 points, meaning this active service increases your retirement benefits significantly.
A newer military retirement plan, called the Blended Retirement System, allows you to receive contributions to a thrift savings plan (TSP). This is only available to newer servicemembers.
Either way, your retirement pay is unlikely to cover all your expenses during retirement. As a reservist, you should save money in a conventional retirement account and take advantage of any retirement benefits your civilian job offers.
Get Solid Guidance
Navigating your military and civilian benefits can be a challenge. Civilian financial advice doesn’t often cover military issues, and military resources often assume you’re on active duty. A financial advisor with experience in both military and civilian finances can be a huge help. We can connect you with a knowledgeable advisor for your specific needs when you contact us.
