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Carefully plan transition from the military

By Jason Alderman

If you're among the hundreds of thousands of people expected to retire or be discharged from the military in the next few years, you're no doubt aware that you'll face many changes – and challenges – upon returning to civilian life. Today's uncertain economic climate makes it all the more important to have a handle on your personal finances and develop a strong game plan.

Fortunately, many resources are available to help you make the transition. Here are a few of the important decisions you may face, along with resources to help:

Tap transition planning services. The U.S. government provides an intensive three–day Transition Assistance Program (www.taonline.com/TAPOffice) to separating or retiring service members and their spouses. It's designed to ease reentry into the civilian workplace through job–search assistance, employment and training information, resume preparation assistance and information on the most current veterans' benefits.

Finding a job. Although the expertise you've acquired in the military often translates readily into marketable civilian job skills, sometimes it takes a little extra effort to make the transition. A few tactics to consider:

Begin your research well before you leave the military – a year or more, ideally.
Take advantage of available resources like the Department of Veterans Affairs' Vocational Rehabilitation and Employment Program (www.vba.va.gov/bln/vre/index.htm).
Start networking – look for organizations like Hire a Hero (www.hireahero.org), Military Exits (www.militaryexits.com) and Helmets to Hardhats (helmetstohardhats.org) that bring military job seekers together with military–friendly employers.
Make your resume civilian–friendly – watch out for military jargon that might be hard to understand.

Continuing education. While investigating career options, learn what additional required education or certifications you lack so you can begin acquiring those skills now – or at least map out a game plan for how to proceed after you leave the military. The GI Bill provides a broad range of education benefits for military veterans. In fact, the Post 9/11 GI Bill recently signed into law will provide even more generous benefits for training or education programs that start after August 1, 2009. Visit the VA's website at www.gibill.va.gov for details.

Protect your retirement savings. Many military personnel participate in the Thrift Savings Plan (TSP), a retirement savings plan that shares many tax–desirable features of typical 401(k) plans. When you leave the military, you'll need to decide what to do with your TSP balance. You can either:

Leave your money in the plan – although you can no longer make contributions.
Roll over your balance into a new employer's plan, if it accepts transfers.
Roll it over into an Individual Retirement Account (IRA).
Take the cash value of your account.

Although the last option may sound appealing, beware: By cashing out before age 59 ½, not only will you have to pay federal (and possibly state) income tax on the distribution, but you'll also be slapped with a 10 percent early withdrawal penalty, very likely leaving you with only slightly more than half of your original balance. Consult a financial professional about your particular situation. If you don't know one, www.plannersearch.org is a good place to start looking.

One last tip: Money could be tight while you make your transition, so it's all the more important to develop a budget you can live with. Practical Money Skills for Life, a free personal financial management site run by Visa, features a guide to creating a budget along with interactive budgeting tools (www.practicalmoneyskills.com/budgeting).

Jason Alderman directs Visa's financial education programs. Sign up for his free monthly e-Newsletter at www.practicalmoneyskills.com/newsletter.

This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.

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