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Financial Planning Challenges for Defense Industry Employees

Financial Planning Challenges for Defense Industry Employees

| April 18, 2022

The defense industry is set to grow 2% from now until 2030, and U.S. spending on defense is projected to reach $900 billion by 2030. (1) With increasing global tensions amidst the war in Ukraine, it’s no wonder that defense industry companies like Raytheon have become one of the top employers for 2022. (2)

Despite the decent salary and benefits that come with the job, many defense industry employees still struggle to make sense of their finances—and that’s okay. As a CERTIFIED FINANCIAL PLANNER™ professional with a large client base of defense industry employees, I have over 30 years of experience helping individuals and families make the most of their finances. If you work in the defense industry and you’re looking to revamp your financial picture in 2022, make sure you’re aware of these top financial planning challenges.

Your Retirement Picture Is Unclear

The biggest financial challenge I’ve seen defense industry employees encounter is not having a clear picture of retirement. This includes not knowing how much you need to save before you retire, as well as not having a forecast for your lifestyle expenses during retirement. You may be actively contributing to your retirement plans and tracking your progress and therefore think it doesn’t matter if you don’t have a retirement “picture.”

But having a concrete plan and a clear trajectory are two of the most important aspects in preparing for retirement. Even if you save $50,000 a year, you won’t know if it’s enough until you establish your goals and calculate how much money you actually need. Most of my clients make significant contributions to their 401(k) plans and try to track their progress on their own, but they still lack the comfort that comes from knowing definitively that they are on the right path.

The first step in achieving that reassurance is having a clear goal for your retirement. Do you want to retire to a beachside condo in Florida, or are you content staying where you are? It will take a different amount of money to achieve each of those goals. Once you have a clear picture in your mind of where you want to end up, it becomes much easier to calculate what you need to do to make it happen. Defining your goals also helps create a system that can be tracked over time and adjusted as needed if life starts to deviate from the plan. 

Protecting Your Family

Comprehensive financial planning requires each piece to be aligned with the others in order for your finances to be structurally sound. Many defense industry employees think they have done plenty by saving diligently, but there are often critical pieces of coverage missing.

The fact of the matter is that savings alone are often not enough to ride out unforeseen major life events. Proper risk management is key to staying afloat during uncertain times, planning for the future, and protecting your family. As a defense industry employee, it is crucial to consider the major categories of loss that could jeopardize your assets and prepare a mitigation strategy to protect against each. 

Be sure to evaluate your life, health, disability and long-term care insurance policies. These expenses are often overlooked and can have devastating effects on your accumulated wealth. As the last two years have shown us, being prepared for the unthinkable (disability, premature death, job loss, etc.) is more important than ever. Proactive planning can help reduce your risk and keep you and your family protected both before and after retirement.

Healthcare Costs in Retirement

If you’ve ever held a hefty medical bill in your hand, you aren’t alone. Healthcare costs in America are among the highest in the world. (3) And as you age, you will likely require more healthcare services. According to the Fidelity Retiree Health Care Cost Estimate, the average couple at age 65 will need about $300,000 saved to cover healthcare costs in retirement. (4)Most people don’t even have that much in their retirement accounts to live on, let alone cover medical costs.

It’s more important than ever to start preparing for the ever-increasing cost of care. The longer you wait, the less options you’ll have. And if you plan to retire before reaching Medicare eligibility, you will have even more out-of-pocket costs to consider. Working with an experienced professional can help you evaluate your options and build a long-term plan for healthcare.

Tax-Efficient Legacy Planning

If you’re like many of our clients, you may have dreams of leaving a legacy behind for your children or grandchildren. Passing down your hard-earned wealth is a commendable goal, but it’s not always as easy as it seems when probate and estate taxes are factored in. Since the estate tax is a hefty 40%, it’s essential to consider the tax implications of your legacy planning sooner rather than later. Some strategies need to be implemented for a certain period of time in order to qualify for tax advantages.

Estate tax strategies are often used to move assets out of a taxable estate in order to avoid probate and estate tax. Though the estate tax exemption has been increased to $12.06 million per person ($24.12 million for married couples), (5) this exemption amount could be changed by Congress, so it’s always a good idea to stay up to date on the latest estate tax-planning techniques.

There are many options to consider that can help you pass on your wealth in a tax-efficient way. Working with a knowledgeable financial professional and a qualified estate attorney can help you make the most of your legacy.

Take the Next Step

If you’re a defense industry employee, the good news is you don’t have to navigate these financial challenges on your own. As a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Financial Consultant®, I am well aware of the financial obstacles you face, and together we can come up with a comprehensive plan to meet your goals. Schedule a no-obligation introductory meeting by calling me at (619) 681-1911, emailing, or scheduling a time online.

About Paul

Paul Neves is president and wealth manager at FSI Wealth Management, a leading independent wealth management firm based in San Diego, California. Paul is a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Financial Consultant®. Working with clients in the financial industry since 1989, Paul has dedicated his life to seeing his clients and their families reach their goals and fulfill the financial plans they have created for their life. He believes that trust and respect are key to building strong, long-lasting relationships with his clients. Paul is known for helping families take the mystery out of preparing for today and tomorrow. 

Paul graduated from San Diego State University in 1989 with a bachelor’s degree in business administration, concentrating in financial planning and services. He is currently a resident of Point Loma, California, where he spends his free time with his family and friends either boating, cooking, wine tasting, or traveling. To learn more about Paul, connect with him on LinkedIn.