Receiving cash for your military pension can provide access to more of your money to meet your immediate financial needs. Instead of waiting to receive monthly pension payments, you can exchange your military retirement for a large lump sum. You could spend the money on anything: debts, a new car or house, a business venture, your child's college education, or even a much-needed vacation. The good news is you don't have to repay the money because it's not a loan. And, you don't have to sell your entire pension; you can sell part of your payments. You can receive cash for your military pension payments for a select time, plus retain any future increases in payments. Then once the specified time passes, you can continue receiving your full retirement payment, as you did prior to the sale. Keep in mind that military and non-military pensions can easily be converted into a lump sum of cash, but it's a very expensive process. For example, discount rates for regular pension payments run 20 percent for assignable pensions and 30 percent for non-assignable ones. Therefore, you should only sell your pension if there are no other options available to you. Consider this: As an active-duty military member retiring after 20 years of service, you will receive retirement pay for the rest of your life. The payout, which is based on your years of service and rank, could be substantial. For example: veterans retiring after 20 years of service in 2006 as an E-8 a usual rank for retiring non-commissioned officers would get 50 percent of their base pay or $2,035 per month. Over the next 30 years, these retirement payments could add up to more than $730,000. Eligibility for Receiving Cash for Your Military Pension You may be eligible to receive cash for your military pension if it meets federal guidelines concerning Veterans Administration disability. If you're a veteran whose military income comes solely from VA, you cannot sell your payments. However, you can get cash for your payments if the VA Disability portion makes up no more then 40 percent of your total military income. This restriction is part of a federal legislation (HR 2297) that is designed as a protective measure to prohibit pensioners from selling their V.A. pension streams. Besides the disability issue, pension fund purchasers use a variety of other factors to determine eligibility. While requirements vary among purchasers, they typically require you to: - Presently be receiving a minimum monthly pension payment of $400 dollars after taxes - Have credit scores of at least 580 from all three credit bureaus: TransUnion, Experian and Equifax - Be currently employed or have a secondary income that allows you to meet your monthly expenses without your pension payments In addition, some pension purchasers require life insurance. Generally, any active insurance policy is acceptable, even if it existed prior to the sale of your military pension. Also, there's generally no age limitation placed on pensioners making the sale. But, ultimately, underwriters will evaluate each submission on a case-by-case basis to determine eligibility. Steps to Getting Cash for a Military Pension Receiving cash for a military pension is a relatively straightforward procedure. Most pension fund purchasers provide free, no obligation quotes. And most don't charge any up-front fees. Here are some general steps to the process of getting cash for your military pension: Step 1: First, you provide information about how much you receive each month from your military pension and any deductions for taxes, child support, alimony, etc. You also must indicate who is making the payments to you (DFAS, GE, IBM, State of Florida, etc.) and when you receive those payments. (You'll need a copy of your most recent Retiree Account Statement or VA Award Letter, or VSI Earnings Statement.) Step 2: Next, the underwriter determines the total amount you would receive from your pension for the number of years you wish to sell. Let's say you want to "cash in" the next eight years of your military pension. If you're an E-8 receiving $2,035 a month, then you would receive $195,360 over the next eight years. Step 3: Then, if approved, a lump sum would be calculated for your offer. You could expect an offer of around $98,000 for your eight years of non-assignable pension payments. (The 30-percent discount rate works out to only about half the original payment due to the lower future value of dollars). Step 4: The entire process takes from four to eight weeks to complete. Converting some or all your military pension into a lump-sum payment can be an excellent tool for enhancing your cash flow and lifestyle. |
