Military Retirement Upon Death Of Retiree Or Former Spouse
Can the former spouse bequeath his/her share of retirement upon death? No – if the former spouse dies, that person’s share of the retirement reverts back to the retiree, until the death of the retiree. Federal law provides: “this section does not create any right, title, or interest which can be sold, assigned, transferred, or otherwise disposed of by a spouse or former spouse.”10 U.S. Code § 1408.
What happens to the retirement benefits upon death of the retiree? Military retirement payments to a former spouse cease upon the retiree’s death. For this reason, the court will often order the retiree to protect the income flow by electing the Survivor Benefit Plan for the former spouse.
Health Care For Retired Military Personnel
While serving as active duty, service members get full health coverage under Tricare. When they retire, they can stay on a Tricare plan. But they usually have to pay for it.
There are three levels of Tricare available to retired military personnel who are not yet eligible for Medicare:
- Tricare Prime
- The U.S. Family Health Plan
- Tricare Select
Tricare Prime offers a managed care program similar to a health maintenance organization, commonly known as an HMO. Its what active-duty personnel and their families generally receive, and retired service members can continue using it. But they must pay an annual enrollment fee plus per-service copays. Participants receive an assigned primary care manager who refers them to specialists as needed.
Military retirees with families can participate in the U.S. Family Health Plan, a subset plan within Tricare Prime. Its only available in six regions and comprises a network of community nonprofit health organizations. If available, it makes for an affordable family option for health coverage with low annual enrollment fees and copays.
Tricare Select is a fee-for-service insurance plan under which participants can schedule an appointment with any Tricare-authorized provider without a referral. It comes with an annual deductible and cost sharing for services used. Its better suited to retirees who live in an area with no Tricare Prime health care providers or who have additional health insurance from another source.
What Is The 10 10 Rule In Military Divorce
Here is a brief description of the 10/10 rule: If the marriage lasted 10 years and the service member or former service member served at least 10 years in the military during that marriage, then the former spouse shall receive those pension benefits from the Defense Finance and Accounting Service .
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How To Maximize Your Redux Retirement Earnings
Redux was an optional retirement plan for active duty service members who began their service after July 31, 1986, but before January 1, 2018. It’s generally considered the least favorable retirement plan.
Under the REDUX system, at the 15-year mark, service members could elect to receive an immediate monetary bonus of $30,000.
- 2.5% times the service members years of service
- minus 1% for each year of service less than 30 years
- times the average of the members highest 36 months of basic pay
For 20 years of service, you would be looking at 50% . Since 20 years is 10 years less than 30 years, your percentage multiplier would be 40% . You then multiply that number by your average of 36 months or 3 years of basic pay. Your basic pay is typically how much you are paid in your current rank.
After age 62, the benefit becomes 2.5% times the number of years of service times the average members highest 36 months of basic pay. Its in favor of the longer serving military member, so the incentive is to remain on active duty longer before retiring.
Try using the Department of Defenses REDUX calculator if you need help calculating your benefits.
State Tax Withholdings For Military Retirement Pay
Youll notice we havent hit upon state taxes yet. This is because many states tax military retirement pay differently. There are 23 states that either dont have an income tax or dont tax military retirement pay, and over 20 that offer special considerations on pensions or military retirement income. You should consider your situation based on your state of residence.
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Do I Get My Husbands Retirement If He Dies
Social Security is a key source of financial security to widowed spouses in old age. About 7.5 million individuals age 60 and older receive benefits based, at least in part, on a deceased spouses work record. When a retired worker dies, the surviving spouse gets an amount equal to the workers full retirement benefit.
Does Frozen Benefit Affect Other Retirement Plans
No. The federal government administers several defined benefit retirement plans , including FERS and CSRS. The 2017 NDAA affects only military retirement, so a spouse married to a DOD civilian with a FERS retirement would still receive the benefits of post-divorce promotions.
The law also does not affect state defined benefit plans , nor any defined benefit plan administered by a private company. In those situations, as with the civilian federal plans, the traditional coverture formula still applies, and the former spouse still receives the benefit of post-divorce enhancements to income.
It also does not have any effect on defined contribution retirement plans, such as the TSP , or IRAs, 401s, etc.
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Military Retirement Calculation When Already Retired At Divorce
The calculation of military retirement if the member is already retired at the time of divorce is simple – Multiply the marital share against the disposable retired pay. And the marital share is this equation:
Months of Marriage Overlapping Military Service———————————————————————-Total Months of Military Service at time of retirement
Note that this coverture formula uses the total military service for the denominator, and the total retired pay for the multiplier, unlike the Frozen Benefit Rule which uses the military service through date of decree, but results in a lower calculation because it uses the smaller multiplier of the hypothetical military retired pay at the time of divorce.
This equation is also used for a post-decree calculation when the decree of dissolution awarding retirement was issued prior to December 23, 2016, when the 2017 National Defense Authorization Act came into effect.
Does The Military Still Have A 20
There have been changes made to military retirement so that those who retire before 20 years whether due to circumstance or personal choice can still obtain retirement pay. Stepping back into civilian life after years or decades in the military brings certain retirement benefits depending on the length of time served and rank in the military. Typically, however, you’ll need to serve for at least 20 years to receive full retirement pay.
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Frequently Asked Questions About Military Retirement
Getting a head start is critical to making the most of any service members retirement – no matter if youre with the Army, Navy, Air Force, Marines or Coast Guard. At a minimum, the transitioning process should start a year before your expiration of time-in-service date, but many people start planning even before that.
What Is The Frozen Benefit Rule
The 2017 National Defense Authorization Act , enacted on December 23, 2016, contains a major change in how states are permitted to divide military retirement.
In short, the former spouses share of a military retirement is frozen as of the date of dissolution. The share awarded receives the benefit of COLAs, but excludes any post-decree promotions or longevity increases. .
The term “disposable retired pay”, for purposes of division of retirement, is modified by a new subsection 10 U.S. Code § 1408, which reads:
“For purposes of subparagraph , the total monthly retired pay to which a member is entitled shall be the amount of basic pay payable to the member for the member’s pay grade and years of service at the time of the court order, as increased by each cost-of-living adjustment that occurs under section 1401a of this title between the time of the court order and the time of the member’s retirement using the adjustment provisions under that section applicable to the member upon retirement.”
In other words, the spouses share of the retirement is based upon the High-3 pay of the service member at the time of dissolution, plus COLAs, but excluding any other increases.
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How Can My Retirement Pay Continue To Go To My Family If I Die
The Survivor Benefit Plan allows a retiree to ensure a continuous lifetime annuity for their dependents after they die. The annuity, based on a percentage of retired pay, is paid to an eligible beneficiary. Unlike some other annuities, payments can never run out. If you die before your spouse, they will continue to get monthly checks until they pass away.
How Is Military Retirement Split In A Divorce
The law only allows division of disposable retired pay, which means the full military pension minus certain deductions. VA disability compensation is not a part of the military pension, and a court, therefore, cannot divide it between divorcing spouses as it could divide, for example, bank accounts and IRAs.
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Paying For Tricare And Dental Coverage
For example, Tricare Prime is free for active duty family members. Retirees pay $47.10 a month for family coverage, with cost-shares for most services.
Dental coverage is also significantly more expensive for retirees. If they don’t have the option of an employer-sponsored plan, retirees may choose to use the same dental insurance that is available for active duty members. While the coverage is the same, the price is not. Tricare dental premiums are calculated based upon family size and location, but they can range as high as $148.85 for a family, as compared to the $34.68 paid by active duty families.
How Do I Protect My Military Retirement In A Divorce
Former spouses will retain all military benefits and privileges, including medical, commissary, military exchanges, if he or she was married to the member at least 20 years, the member had at least 20 years of creditable service, and there was at least a 20-year overlap between the marriage and the military service.
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War Widows Or Widowers Pension
|Total War Widows and Widowers Pension||$984.20|
|Couples rate, no children||$134.60|
|Couples rate, no children||$206.40|
*Note: – For Veteran Payment and Service and Social Security Age pensioners with dependent children, Rent Assistance is considered a child-related payment and is paid as part of Family Tax Benefit Part A through the Family Assistance Office.
Expert Insight On Maximizing Military Retirement And Benefits
Director of Business Development at PARCO. Military – Separated in 2016 at the rank of Captain with a total of eight years of service, which included three years of enlisted time before attending Officer Training School at the rank of A1C.
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Armed Forces Pension Schemes
As a veteran you may either be receiving a service pension, or waiting to receive it once you reach a certain age. How much that pension is, and when it is paid, depends on the pension scheme to which you belong.
If you’re not receiving any money you may also have an unclaimed pension.
There are three main pension schemes:
Armed Forces Pension Scheme 1975 :Closed to new entrants on 5 April 2005. Paid service after age 18, for other ranks, counts towards pension . Claim at age 60 for benefits earned up to and including 5 April 2006, and age 65, for earnings after that date.
Armed Forces Pension Scheme 2005 :All new entrants on or after 6 April 2005 joined this scheme. All paid service counts towards pension. Claim age 65 or age 55 at a reduced rate.
Armed Forces Pension Scheme 2015 :All new entrants on or after 1 April 2015 joined this scheme. All paid service counts towards pension. Claim at your state pension age, or age 55 at a reduced rate.Serving personnel aged 45 or over on 1 April 2012 remain in their ‘old’ scheme but anyone else has been transferred to AFPS 15.
Minimum service to qualify for AFPS 75:
- 1 April 1975 – 31 March 1978 – at least 5 years reckonable service* AND at least age 26 on discharge.
- 1 April 1978 – 5 April 1983 – 5 years reckonable service.
- 6 April 1983 – 5 April 1988 – 5 years paid service.
- 6 April 1988 onwards – 2 years reckonable service* after age 18 as an Other Rank .
*Reckonable service is service after age 18 as an Other Rank in these cases.
Example With Inflation Adjustments
- Army LTC retiring at age 43 after 21 years in service.
- Annual military retirement income pay will be $60,000
- His life expectancy is until age 83.
- That’s 40 years of payments totaling more than $3 Million!
If he was using his own money to receive that level of income for 40 years, he would have need to save $1.6 Million by the time he left the Army. That… is the present value of the military pension.
Do most career service members realize that the purchasing power of that pay? Do the military spouses?
You should, and the retirement calculator with military pension can show you how.
Because we all know the Government doesn’t properly show how to protect that asset and instead convinces you to buy into the costs of the Survivor Benefit Plan and VGLI.
If you’re a military service member, pay close attention to how much your pension is worth and take steps now to make sure it’s protected. Calculating the present value of military pension benefits can help you get an idea about what your future retirement income might look like – but don’t forget that there are other factors too .
Be sure to explore all the options before making any decisions on which type of plan best suits your needs for retirement planning purposes. We have more videos coming soon!
If this sounds complicated or if you want some help with these future value calculations, let us know!
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Is The Former Spouse Entitled To A Portion Of The Military Spouse’s Pension
Yes. The Uniformed Services Former Spouse Protection Act permits state courts to apply the family law principles of their particular state when deciding how to divide military pensions in divorce. the full text of the USFSPA. Under the USFSPA, state divorce courts can award a military pension to the service member or divide it between the spouses. If the pension is awarded entirely to the service member, courts may compensate the spouse for his or her share of the military pension from other marital assets.
Military Retirement Pay Options
There are four military retirement pay programs. What you use and whether you have a choice between them depends on when you entered military service. Those who entered the military before 1986 are in the Final Pay Retirement System or the High 36 Retirement System. Those who entered after Jan. 1, 2018 are in the Blended Retirement System. But those who entered the military between Aug. 1, 1986 and Dec. 31, 2017 get to either use the CSB/REDUX Retirement System or the Blended Retirement System. Which system is right for you? Youll need to read on to learn.
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Military Retirement Tax Withholdings
Regarding your monthly withholdingsWhen you retire, your tax withholdings will be determined by how you fill out your DD Form 2656-Data for Payment of Retired Personnel. This form, which directs DFAS where to send your pension after retirement, also calculates your dependent data & tax withholdings, similar to an IRS Form W-4.
Within this form, you can request DFAS to withhold at a higher tax rate , or you can claim as many dependents and exemptions as your family status allows, to minimize your tax withholdings. The IRS website has a withholding calculator so you can estimate your monthly tax withholding.
Lets Put Everything Together
Lets look at a fictional scenario using the numbers I outlined above. My estimated pre-tax, pre-deduction pension was approximately $4,048, give or take. Below are the costs that I would take into consideration:
|Military Retirement Pay Breakdown|
|Expected take-home pay:||$2,501.00|
As you can see, this would be quite a shock if youre not expecting ita 40% drop, right when youre getting used to not having a full job. This doesnt take into consideration all of the other items.
Your best bet is to do the math in advance, budget for it, and move on. You can try to cut out some of these items to make the most out of your pension. However, VGLI, Tricare, & SBP are all very important insurance aspects of your post-military life, and you should consider the cost of replacing them or going without before you make your decision.
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How Do I Calculate My Military Retirement Pay
After 20 years of service, military members can retire under the High-3 retirement plan with 50% of their basic pay, full medical coverage and a range of other benefits. Service members who retire under the newer BRS will earn 40% of their base pay with whatever has been accrued in their TSP. Service members in the Guard or Reserves can also earn military benefits based on a point system. Benefits start at age 60, which is close to the traditional retirement age of 65.