now & before

Hello,
1)He had served in the army for ten years;then he retired and married.His children were now at school.

2)He served in the army for ten years;then retired and married. His children are now at school.

for the first sentence, is it better to write:
He had served in the army for ten years;then he retired and married. His children were at school at that time.

His children are now at school. Is it meaning the word ‘now’ is the moment they are speaking the conversation?
His children were now at school. Is it meaning the word ‘now’ is the moment before they are speaking the conversation?

It is not clear that this version is better. The choice depends to some extent on the wider context, and whether it’s clear what “that time” refers to.

Yes. (Except in the special case of a narrative written in the historic present.)

The sense is of a narrative; “now” refers to some point in the past – the point which the narrative has reached. This is likely to be a reasonably long time ago – years even. It is not referring to a moment ago.

General point: watch the spacing after punctuation. For example, the first sentence should be:

  1. He had served in the army for ten years; then he retired and married. His children were now at school.

Thanks a lot, Dozy.