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These 6 financial strategies can help military members transition to civilian life

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When it is time to leave the service, military members may be in for a financial shock.

While the military generally packages everything for you, from jobs to housing and benefits, it's a different story when you leave the service, said certified financial planner Daniel Yerger, president of My Wealth Planners, based in Longmont, Colorado.

"When you come out into civilian life, you're dealing with an a-la-carte job market," explained Yager, who served in the U.S. Army from 2008 to 2014 and now helps active duty military members with the transition to civilian life.

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"That is the biggest shocker that comes along, as well as the cost of things."

Leaving the military yourself? These strategies can help you become financially secure when you transition back into civilian life.

1. Plan ahead

Plan your move out of active duty before the time comes. There are many military transition support programs that can be really effective three months to one year prior to leaving, Yerger said. Offerings can include job placement, such as interning, or skills training.

Saving money before you leave is also a good idea, since it will give you a nice cushion while you pursue a degree or new training opportunity, said CFP Bill Sweet, chief financial officer of Ritholtz Wealth Management in New York.

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Transitioning from active service to the civilian workforce

Begin saving at least six months to a year before you are discharged.

2. Find a mentor

Networking plays a big role in any job hunt.

With more than 18 million veterans in the U.S., accounting for about 7 percent of the civilian non-institutional population, there are people who can help you with your career transition.

"Find that person and ask them for help," Sweet said. "I would bend over backwards for someone asking."

3. Use the GI Bill

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For those who feel they need further education to get their next job, the Montgomery GI Bill Active Duty can help foot the costs for things like tuition, books and housing. It provides up to three years of education benefits. The amount of the benefit depends on the length of service.

While most use it after they leave the service, you can start while on active duty if you want to be able to get civilian work very quickly, Yager said. In your off-duty hours, you can take part-time classes or get job training, he said.

There is also the Post-9/11 GI Bill for those who served on active duty for at least 90 days after Sept. 10, 2001, as well as a Montgomery GI Bill Selected Reserve for reservists with a six-year obligation who are actively drilling.

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4. Be aware of tax changes

When in the service, members get different types of tax benefits, like the tax-exempt basic allowance for housing. Deployment pay in combat zones isn't taxed federally and many states do not tax military member's income.

Yet once you are a civilian, you'll be subject to income tax — unless you live in one of the nine states that don't tax income. If you buy property, you'll pay local property taxes. Be aware of what you'll have to start paying, and make any adjustments in your budget, if necessary.

5. Save for retirement

When you leave active duty, you will no longer be contributing to your military retirement account. Yet it's important to keep putting money away. Open an individual retirement account — either traditional or Roth — or contribute to a 401(k) or 403(b) plan with your new employer.

You'll also have to decide what to do with your military retirement funds. Unless you are grandfathered into the military's legacy pension plan, you are in the "Blended Retirement System." It combines a traditional pension with a defined contribution plan, the Thrift Savings Plan (TSP).

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You can either keep the TSP funds in place or you can roll them over into another qualified account.

"For me personally, it would be really really hard to think about a reason to move away from the TSP," said Sweet, noting that the costs are among the lowest in the industry.

If you want your retirement savings streamlined into one account, then consider rolling over the funds into a new account.

6. Protect your health

Without health insurance, you could be one hospital visit away from financial disaster.

If you retired after 20 years of active duty service, you are eligible for insurance through Tricare, which also provides coverage while on active duty. You also may get Veteran Affairs health-care coverage for any condition related to your service.

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If that's not the case, you'll have to look into getting insurance outside of the military.

To start, Sweet recommends extending your active-duty coverage temporarily through the Continued Health Care Benefit Program while sorting out your next move.

It provides health-care coverage for 18 months to 36 months post-service.

Use the time to sort through your options — whether you eventually get coverage through a new job or have to find a plan through the Affordable Care Act.

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