Military Retirement Financial Planning
Financial planning for military retirement has gotten complicated with all the investment options, benefit programs, and income sources flying around. As someone who planned my own retirement over several years and counseled dozens of service members on their finances, I learned everything there is to know about building a solid financial foundation for life after the military. Today, I will share it all with you.
Understanding Military Pension
Probably should have led with this section, honestly. Your pension is the foundation of military retirement—guaranteed monthly income for life with annual COLA adjustments. The system you’re under (High-3 or BRS) determines your calculation, but the concept is the same: serve 20+ years, get a percentage of your base pay for life.
Legacy High-3 System
High-3 gives you 2.5% per year of service times your highest 36 consecutive months of base pay. Twenty years equals 50%, thirty years equals 75%. It’s straightforward math, and for most people, those highest 36 months are your final three years when you’re at peak rank and pay grade.
Blended Retirement System (BRS)
BRS drops the multiplier to 2.0% (40% at 20 years) but adds automatic 1% TSP contributions plus up to 4% matching. You also get continuation pay at your 12-year mark. That’s what makes BRS endearing to us younger service members—you get something even if you don’t hit 20 years, which the legacy system never provided.
Thrift Savings Plan (TSP)
Max out your TSP contributions if possible—the 2026 limit is $23,500, plus $7,500 catch-up if you’re 50+. The fees are incredibly low (under 0.05% for most funds), which means more of your money stays invested and grows over time.
Traditional vs. Roth TSP
Traditional TSP reduces your taxable income now but you pay taxes on withdrawals later. Roth TSP is after-tax contributions with tax-free withdrawals in retirement. If you’re junior enlisted or a junior officer in a low tax bracket, Roth makes sense. Senior officers and NCOs in higher brackets benefit more from traditional TSP’s immediate tax savings.
Healthcare in Retirement
TRICARE is worth thousands annually compared to civilian health insurance. Choose Prime for lowest costs if you live near military facilities, or Select for provider flexibility. At 65, TRICARE for Life becomes your Medicare supplement with virtually zero out-of-pocket costs.
Survivor Benefits
SBP costs 6.5% of gross retired pay but guarantees your spouse receives 55% of your pension for life. For most married retirees with dependent spouses, this is essential protection. DIC provides additional tax-free payments to survivors of service-connected deaths.
Veterans’ Benefits
File for VA disability if you have service-connected conditions—it’s tax-free income that supplements your pension. Use VA home loans for zero down payment mortgages with competitive rates. The Post-9/11 GI Bill funds education for you or your dependents. These benefits add thousands in annual value when used strategically.
