Navigating the ‘gray area’ of military retirement

Retiring from the Reserve or National Guard

Retiring from the military is a huge accomplishment: You've worked hard and served your country, and now you’re ready to begin your next chapter. But most retirees from the Reserve or National Guard also experience a period of time known as the “gray area.” It’s the time after they’ve retired from service but before they’ve started to receive retirement benefits, typically at age 60.

The gray area can be a confusing time of transition for many military members and families. Here, we’ll explore some common questions about gray area retirement, like when retirement pay will start and the benefits you can access in the meantime.

What is military ‘gray area’ retirement?

The gray area is the time between your official retirement from the Reserve or National Guard and when you start receiving your retired pay and benefits. Most retired Reserve and National Guard members are eligible for benefits starting at age 60.

Retirement plan options

When you retire from the Reserve or National Guard, one of your first important decisions is to pick a Reserve Component Survivor Benefit Plan option. It can be confusing, and all three RCSBP options have pros and cons.

• Option A: This option allows you to defer your RCSBP selection until your military pension begins and to designate a beneficiary later, usually at age 60. This can be a good option if you retire without an eligible beneficiary or marry after your military retirement. But if you die before age 60, your eligible beneficiaries won’t receive your benefit.
• Option B: If you select this option when you retire but die before you start receiving military retirement benefits, your beneficiary will receive the survivor pension when you would have turned 60. Depending on your age when you die, though, that could take years, so it might not be a good option inf your beneficiaries need your income.
• Option C: With this option, your beneficiary receives the survivor pension immediately after your death, regardless of your age. This gives them immediate access to income to offset any financial hardship caused by your death, but it means this RCSBP option costs more than the other two.

The retirement timeline

You’re eligible for retirement benefits from the Reserve or National Guard after at least 20 years of qualifying service. Retirement pay and benefits usually start at age 60, but active duty or active service can lower the age you become eligible.

Because most members of the National Guard and the Reserve retire years before their 60‍ ‍^th birthdays, they must apply for retirement pay. It does not automatically kick in on your 60‍ ‍^th birthday and you won’t be paid retroactively for application delays past age 66. Submit your retirement application no earlier than nine months and no later than 90 days before your desired retirement date.

It can take the Defense Finance and Accounting Service, or DFAS, up to 60 days to process your retirement application and issue your first retirement paycheck. Incomplete or incorrectly filled out applications can delay your benefits.

Key benefits during the gray area

You may be wondering what benefits are available to gray area retirees. While you won’t have access to your full retirement benefits, you do have some options.

Health care

1. Gray area retirees don’t have access to TRICARE Prime until they start receiving their full retirement benefits at age 60. But during the gray area, you might be eligible for TRICARE Retired Reserve, or TRR.‍ ‍ Make sure you compare TRR costs and coverage with health insurance available through a civilian employer insurance or private policies you can purchase. The key is to consider all options to ensure you and your family have the health coverage you need until your retirement health care benefit kicks in, and at the best possible price.

Here's an important point that is often overlooked: Even if you are eligible to receive your military retirement pay before age 60 due to qualifying periods of active service, eligibility for healthcare stays at age 60.

Other benefits

Good news: During the gray area, you retain full access to the commissary and exchange. And there are other benefits, like space-available flights and access to morale, welfare and recreation, or MWR, programs. These benefits can save you money, you just have to know where to find them.

Transition support

Even though you’ve retired from the military, you still have access to military resources. The Transition Assistance Program, or TAP, and your service branch’s Retirement Service Office offer online portals that help you view points, estimates and retirement documents. These resources can help you understand your retirement points and estimate future retirement pay, clarify your TRICARE options and determine how your retired pay will fit into your overall retirement income.

What happens if a retiree dies during the gray area?

This is a tough and emotional topic, but it's important to address. It's crucial to understand what happens if you pass away before your retirement pay starts and how it can impact your beneficiaries.

First steps for surviving family members

If a retiree passes away during the gray area period, the surviving spouse or family members should:

1. Contact the service’s casualty assistance office. It can assign a casualty assistance officer, or CAO, to guide the family through the paperwork and benefits.
2. Gather key documents. These including the retiree’s 20-year letter, retirement orders and separation documents, marriage certificate and birth certificates for children, and any RCSBP election forms.
3. Be sure to ask about RCSBP and unpaid retirement pay. Even if it hasn’t started yet, there may be benefits based on the elections made when the gray area retire left the service.

Survivor benefits & entitlements

If you die as a gray area retiree, the timing of if and when your survivors might receive the survivor portion of your military retirement depends on which RCSBP option you chose.

Once your retirement pay begins, your RCSBP election in most cases will automatically roll into the Survivor Benefit Plan, or SBP. The SBP which allows retired service members to leave up to 55% of their retired pay as a monthly annuity to eligible survivors. This can be a good way to help protect your family after you’re gone.

Health care

If your family relies on you for health care coverage, it’s important to think about what they’ll do if you die in the gray area. If they are not yet eligible for Medicare or don’t have coverage through a civilian employer, they might have to purchase a private policy or remain under TRR.

Here is one important aspect of TRR. For surviving family members to have access to TRR, the sponsor or gray area retiree must have been covered by TRR when they died. If not, the family won’t have access to TRR.‍ ‍

VA survivor benefits

Your loved ones may be eligible for VA benefits after your death, which can greatly reduce financial stress during a difficult time. It’s important to understand if and how your loved ones can access VA survivor benefits.

Estate planning in the gray area

Talking about these topics ahead of time can be difficult, but it's important to have this conversation. Discuss your wishes and plans with your family. Create a file with your critical documents so your loved ones can easily find what they need.

Also, helping them understand what they might have available to them and decisions they will need to make can help reduce stress in what is already a stressful and emotional time.

Creating a ‘survivor's file’

There are several useful documents that your loved ones might need after you’re gone:

• Retirement orders
• DD Form 214, or Certificate of Release or Discharge from Active Duty
• Marriage certificate, if applicable
• Birth certificates for dependents
• RCSBP election forms, if applicable
• Life insurance policies
• Will or trust documents
• Financial account information

Financial and legal support

Gray area retirement touches a lot of different systems and areas, from DFAS, the VA and TRICARE to Social Security and civilian retirement plans. It can be overwhelming, but you don’t have to figure it out solo. It could be helpful to work with several professionals:

• Financial advisor: Can help estimate your future retirement pay, compare TRICARE Retired Reserve to employer or marketplace plans, and build a financial plan that combines your future military retirement pay with other savings and pensions
• Attorney or estate planning professional: Can help ensure your will, powers of attorney and beneficiary designations are aligned with your intentions and help make sure your RCSBP and SBP choices fit with your overall estate plans
• Retirement Services Office: Can walk you through how and when to apply for military retirement benefits and pay and help confirm your RCSBP or SBP elections

It’s also smart to periodically review your beneficiaries on your Thrift Savings Plan account and any life insurance and civilian 401(k)s or IRAs.

The bottom line

Gray area retirement can be a little confusing, but with the right information, you can navigate it with confidence. Make time to understand the timeline, know your benefits and plan for the unexpected. By taking these steps, you can ensure a smooth transition into retirement and a secure future for you and your family. Help is available, and a little effort now can make a big difference for your future and for the people you love.