Receiving cash for your military pension can give you 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 can spend the money on anything: debt, a new car or house, a business venture, your child’s college education, or even a much-needed vacation.
The good news is that you don’t have to pay it back because it’s not a loan. And he doesn’t have to sell his entire pension; you can sell part of your payments. You can receive cash toward your military pension payments for a selected period of time, plus withhold any future increases in payments. Then, after the specified time has elapsed, you can continue to receive your full retirement payment, as you did before the sale.
Keep in mind that military and non-military pensions can be easily converted into a lump sum of cash, but it is a very expensive process. For example, the discount rates for regular pension payments are 20 percent for allocable pensions and 30 percent for unallocatable ones. Therefore, you should only sell your pension if no other options are available to you.
Consider this: As an active duty military retiring after 20 years of service, you will receive a retirement payment for the rest of your life. The pay, which is based on his years of service and rank, could be substantial. For example: Veterans retiring after 20 years of service in 2006 as E-8s, a common rank for retiring NCOs, would receive 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 to Receive Cash for Your Military Pension
You may be eligible to receive cash toward your military pension if you meet the Veterans Administration’s federal disability-related guidelines. If he is a veteran whose military income comes solely from VA, he cannot sell his payments. However, he can get cash for his payments if the VA Disability portion does not exceed 40 percent of his total military income. This restriction is part of federal legislation (HR 2297) that is designed as a protective measure to prohibit retirees from selling their VA pension streams.
In addition to the disability issue, pension fund purchasers use a variety of other factors to determine eligibility. While the requirements vary among buyers, they generally require that:
– Currently receiving a minimum monthly pension payment of $400 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 having to pay your pension
Also, some pension buyers require life insurance. In general, any active insurance policy is acceptable, even if it existed prior to the sale of your military pension. Also, there is generally no age limit for retirees making the sale. But ultimately, subscribers will evaluate each submission on a case-by-case basis to determine eligibility.
Steps to Get Cash for a Military Pension
Receiving cash for a military pension is a relatively simple procedure. Most pension fund buyers provide free, no-obligation contributions. And most don’t charge any upfront fees. Here are some general steps in 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 must also indicate who is making the payments to you (DFAS, GE, IBM, State of Florida, etc.) and when you receive those payments. (You will need a copy of your most recent VA award letter or retiree statement or VSI earnings statement.)
Step 2: Next, the insurer determines the total amount you would receive from your pension for the number of years you want to sell. Let’s say he wants to “cash in” the next eight years of his military pension. If you are an E-8 and earn $2,035 a month, then you will receive $195,360 for the next eight years.
Step 3 – Then, if approved, a lump sum will be calculated for your offer. You could expect an offer of about $98,000 for your eight years of unallocatable pension payments. (The 30 percent discount rate is only half the original payment due to the lower future value of the dollars.)
Step 4: The entire process takes four to eight weeks to complete.
Converting some or all of your military pension to a lump sum payment can be a great tool to improve your cash flow and lifestyle.
PLEASE NOTE THAT WE ARE NOT CURRENTLY OFFERING THIS SERVICE. VISIT USPENSIONFUNDING.COM TO QUOTE.
