Image: Bill Longshaw / FreeDigitalPhotos.net
Salary and location are two factors that people find to be very important when deciding to make a career move. But receiving a job offer with a higher salary than your current military pay doesn’t automatically mean a raise. In fact, depending on location, it could mean a pay cut!
A friend of mine working with the same recruiting firm recommended the CNN Money Cost of Living Calculator to me. You can enter your current salary (use a military pay chart and factor in BAH) and location, a prospective location, and it will generate how much more (or less) you would need to live similarly in that new locale.
For example, if you make $70,000 in Evansville, Indiana, but are offered an $80,000 job in Chicago, Illinois, that’s a raise, right? Wrong. You’d need to make $86,000 to live to the same standard… and that’s just within the Midwest!
Another thing to consider? Income tax. Texas, for example, doesn’t charge you income tax at all. New York, you could be taxed up to 8%. So that lower salary in Texas suddenly becomes more attractive.
Unless you finish up your 20 years in the Reserves or National Guard, chances are transitioning JMOs won’t be receiving a full military retirement or continuing the Thrift Savings Plan. I’m not. And while I’ve been putting a little bit away for my retirement since I was a teenager, I’m not yet savvy on what retirement plans entail in the civilian world… so with a little help from a finance guru friend and internet research, I’ve got the 411 on IRAs and 401(k)s for those of us who don’t yet know the lingo.
- free retirement account/long-term savings plan only available through an employer (replaced pensions in many cases)
- money comes out of your paycheck (sometimes “matched” by employer!), with certain limits to contributions
- traditionally, taxes are paid when you take the money out, not put money in
- money is invested in money market funds, growth funds, etc. to increase over time
- not protected by Pension Benefit Guaranty Corporation (which pays out those with failed pension plans)
- can be Traditional or Roth
- Traditional IRA contributions are tax-deductible (under certain income limits), with no taxes on growth, though you do pay taxes when you withdraw it at age 70 1/2
- Roth IRA contributions are not tax-deductible, with no taxes on growth, and have fewer withdrawal restrictions and requirements or taxes due when you withdraw at age 59 1/2
- Anyone can open a Traditional IRA, but not everyone qualifies to open a Roth IRA; contributions are also limited
These retirement accounts are a great way to invest and plan your future. It’s important to diversify your investments (don’t put all your eggs in one basket!) but these accounts are a great start for when you transition to a civilian career.
Thanks to LearnVest who wrote this great article that moved me to start finding out more.
There seems to be an annual mass exodus of officers in the spring… it’s the end of their year group’s post-college contracts, and they’re in a huge hurry to get out. And even though I’m one of them, I’d actually recommend that you not join the herd.
Ever heard of the Post-9/11 GI Bill? As of August 1, 2011, the Post-9/11 GI Bill will cover up to 100% of public school in-state tuition and fees, up to $17,500 annually for private schools, and a basic housing allowance stipend at the E-5 with dependent rate.
If you’re a service academy grad, you don’t qualify for these benefits unless you serve beyond your initial obligation. And I understand you may not want to spend an extra three years in the military to earn 100% of those benefits to pay for grad school. But did you know you can stay in just a few extra months and earn up to 40%? Yup, delaying your REFRAD for at least 90 days past your initial commitment will yield 40% of those benefits. That means big $$$ if you’re planning to pursue higher education after your transition.
So do your homework, and read up. If you’ve already put in your REFRAD paperwork, it’s (usually) never too late to pull it back and extend it. It could be beneficial to your future and your family.