Maximize Your DoD Retirement Benefits
Maximize Your DoD Retirement Benefits
DoD retirement benefits have gotten complicated with all the plan options, contribution limits, and healthcare choices flying around. As someone who spent over two decades navigating military retirement systems and counseling junior service members on their financial planning, I learned everything there is to know about squeezing every dollar out of your DoD benefits. Today, I will share it all with you.
Understand the Basics
Probably should have led with this section, honestly. Before you can maximize your retirement benefits, you need to understand what you’re actually entitled to. DoD retirement comes with a pension, the Thrift Savings Plan, healthcare through TRICARE, survivor benefits, and a bunch of smaller perks. Each piece plays a role in your overall financial security after you hang up the uniform.
Pension Plans
Your pension is the foundation of military retirement. Whether you’re under High-3 or the Blended Retirement System (BRS), your monthly pension check is what gives you that baseline income for life. The system you’re in depends on when you joined, and understanding the math behind it can help you make smarter career decisions.
High-3 Retirement Plan
High-3 is straightforward: 2.5% of your highest 36 months of base pay, multiplied by years of service. So if you retire at 20 years with a High-3 average of $6,000/month, you’re getting $3,000/month for life (50% of $6,000). Every extra year you serve adds another 2.5% to that multiplier. Staying to 30 years gets you 75%, which is why so many people push past the 20-year mark—that extra income adds up fast over a 30+ year retirement.
Blended Retirement System (BRS)
BRS trades a smaller pension multiplier (2.0% instead of 2.5%) for government TSP contributions and continuation pay. So at 20 years with that same $6,000 High-3 average, you’d get $2,400/month instead of $3,000. The difference is that BRS members receive automatic 1% TSP contributions plus up to 4% in matching, which can make up for the lower pension if you’re disciplined about investing. BRS also gives you something if you leave before 20 years, which High-3 doesn’t.
Thrift Savings Plan (TSP)
The TSP is the military version of a 401(k), and if you’re under BRS, you absolutely need to contribute at least 5% to get the full government match. That’s a 100% return on your money instantly—there’s no investment in the world that beats free matching contributions.
- Contribute enough to get the full match. BRS members get automatic 1% plus matching up to 4% more, so contribute at least 5% of your base pay. That’s free money you’re leaving on the table otherwise.
- Choose your investment options wisely. The TSP offers lifecycle funds (L Funds) that automatically adjust as you age, or individual funds like the C Fund (stocks), G Fund (government securities), and F Fund (bonds). Younger service members can afford more risk, so heavy allocation to the C and S funds makes sense early in your career.
- Consider Roth TSP for tax-free withdrawals. Roth contributions are after-tax, so you pay taxes now but withdraw tax-free in retirement. If you’re junior enlisted or a junior officer in a low tax bracket, Roth TSP is usually the smarter choice than traditional TSP.
Healthcare Options
Healthcare is one of the most valuable benefits of military retirement, and TRICARE costs a fraction of what civilians pay for comparable coverage. Choosing the right plan can save you thousands annually while keeping your family healthy.
TRICARE Prime
TRICARE Prime is the cheapest option with the lowest out-of-pocket costs. You’re assigned a Primary Care Manager (PCM), and you need referrals to see specialists. If you live near a military treatment facility and don’t mind the managed-care model, Prime is hard to beat financially. We’re talking $12 copays and minimal deductibles.
TRICARE Select
TRICARE Select costs more but gives you complete flexibility to see any TRICARE-authorized provider without referrals. You’ll pay annual deductibles and cost-shares (20% for outpatient, 25% for inpatient), but you can choose your own doctors and don’t need to coordinate through a PCM. That’s what makes TRICARE Select endearing to us retirees—it balances affordability with the freedom to manage your own healthcare.
Survivor Benefit Plan (SBP)
SBP is the life insurance of military retirement, and it’s one of the most important decisions you’ll make. Your pension stops when you die—unless you enroll in SBP to provide continuing income for your survivors.
- You can elect coverage for up to 55% of your retirement pay. So if you’re getting $3,000/month, your spouse would receive $1,650/month after you die. That coverage continues for their entire lifetime.
- Premiums are 6.5% of your gross retired pay, deducted automatically. On a $3,000 pension, that’s $195/month. The premiums come out pre-tax, which reduces your taxable income slightly.
- Consider your family’s needs carefully. If you’re married with dependents who rely on your income, SBP is usually a no-brainer. If you’re single with no dependents, you might decline coverage and invest the premium savings elsewhere.
Other Benefits
Beyond the big-ticket items, military retirees have access to commissaries, exchanges, base facilities, and veteran organizations—all of which can significantly reduce your cost of living in retirement.
- Commissaries: These are on-base grocery stores that sell at cost plus a 5% surcharge. No sales tax, and you’ll typically save 20-30% compared to civilian grocery stores. If you live within reasonable distance of a base, weekly commissary shopping adds up to thousands in annual savings.
- Exchanges: The Exchange (AAFES, NEX, MCX, etc.) offers tax-free shopping on everything from clothes to electronics to gas. The prices are competitive, but the lack of sales tax is where you really save money.
- Veterans Organizations: Groups like the American Legion, VFW, and DAV provide networking, advocacy, and assistance with VA claims. Many offer free legal help with benefits claims and appeals, which can be invaluable when you’re dealing with the VA bureaucracy.
Maximizing Benefits Strategies
Knowing your benefits is one thing—actually maximizing them requires deliberate planning and smart decisions throughout your career and into retirement.
- Start planning early. The earlier you contribute to TSP, the more time compound interest has to work. A 22-year-old E-3 contributing $200/month will have way more at retirement than an E-7 who starts at age 35, even with higher contributions later. Time is your biggest asset in retirement planning.
- Utilize all available resources. The DoD offers free financial counseling through Personal Financial Management programs on every installation. Take advantage of pre-retirement briefings, financial planning tools, and one-on-one counseling sessions. These counselors know the military retirement system inside and out.
- Stay aware of legislative changes. Congress periodically changes retirement benefits, TRICARE costs, and TSP rules. The 2018 BRS rollout is a perfect example—people who didn’t understand the changes made uninformed opt-in decisions. Subscribe to military news sources and attend retirement seminars to stay current.
- Stay healthy. Healthcare costs can absolutely wreck a retirement budget if you develop chronic conditions. Maintaining fitness standards even after retirement, eating well, and avoiding tobacco can prevent expensive health issues down the line. TRICARE is cheap, but it’s not free—preventable health problems still cost money.
- Network with other retirees. Other retirees have been through the transition process and can share insights you won’t find in official publications. They’ll tell you which TRICARE plan works best in your area, which commissaries have the best deals, and how to navigate VA claims. That collective wisdom is invaluable.
