The most expensive mistakes in a military transition happen in the last year of service, in elections that are hard or impossible to undo: the Survivor Benefit Plan, the Blended Retirement System lump sum, what to do with your Thrift Savings Plan and when to file your VA claim. After 20 years, retired pay is 50% of your highest three years of basic pay under the legacy system and 40% under the Blended Retirement System. A one-time plan from a fee-only planner has a median of $2,000, which is small against a pension worth decades of income.
What your retired pay is worth
The formula is years of service times a multiplier times your retired pay base, the average of your highest 36 months of basic pay. The multiplier is 2.5% a year under High-3 and 2.0% under the Blended Retirement System (BRS), which applies to everyone who entered on or after January 1, 2018, and to those who opted in. In exchange for the lower multiplier, BRS adds 1% of basic pay to your TSP automatically and matches up to 4% more, plus a mid-career continuation payment between 8 and 12 years of service that comes with a three-year commitment.
On a $90,000 retired pay base, the formulas give:
Retired pay rises with cost-of-living adjustments and is paid for life. It’s taxable income. A planner should treat it as what it is: a large, inflation-adjusted income stream that lets the rest of your savings take more investment risk than a civilian with no pension could.
The decisions that matter
The Survivor Benefit Plan
Retired pay stops when you die. The Survivor Benefit Plan (SBP) keeps part of it going for your spouse. Full coverage costs 6.5% of the base amount you choose, usually your full retired pay, and pays your surviving spouse 55% of that base for life. On $36,000 of retired pay, that’s a $2,340 yearly premium for a $19,800 yearly survivor annuity. Premiums stop once you’ve paid for 360 months and reached 70.
The rules make this a decision to get right the first time. Declining SBP, or choosing less than full coverage, needs your spouse’s written agreement. The election becomes irrevocable once you’re entitled to retired pay. There’s one later window to drop it: the year starting on the second anniversary of your first retired pay, which again needs your spouse’s agreement.
A good planner compares SBP with the life insurance that would replace it, using real quotes for your age and health, and with what your spouse would have from Social Security, savings and their own pension.
The BRS lump sum
At retirement, BRS members can take a lump sum worth 25% or 50% of their retired pay until Social Security retirement age, which is 67 for anyone born in 1960 or later. It’s the discounted present value of that pay, so you get less than the payments you give up. In return, monthly retired pay is 75% or 50% until that age, then returns to the full amount. It can be paid at once or in installments.
The lump sum makes sense for a specific use that beats the pension: a business, or debt at a high interest rate. It rarely makes sense because the check is large. Ask for the dollar figures for both options before you elect.
Your TSP after you leave
You can leave the money in the TSP, roll it into an IRA or a new employer’s plan, or take it out. In 2026 you can put in up to $24,500 while still serving, plus $8,000 more from age 50, or $11,250 more at ages 60 to 63.
If you contributed while serving in a combat zone, part of your balance may be tax-exempt. The IRS says the part of a distribution that comes from tax-exempt combat zone contributions is tax-free, though the earnings on it are taxable. Tell any advisor about that balance before a rollover, so it ends up where it stays tax-free.
VA disability and your retired pay
VA disability compensation is not taxable. Rates that took effect December 1, 2025 run from $180.42 a month at a 10% rating to $3,938.58 at 100%, for a veteran with no dependents.
Retirees rated 50% or more receive their full retired pay and their full VA compensation. Below 50%, VA pay generally replaces an equal part of your taxable retired pay, so the gain is mainly a tax saving. Either way, file early. The Benefits Delivery at Discharge program takes claims 180 to 90 days before you separate.
Health coverage in the gap
Retirees and their families stay eligible for TRICARE, but only if they enroll in a plan within 90 days of the retirement date, and costs go up: enrollment fees, copayments and cost-shares. Members separating without retiring are in a different position. The Transitional Assistance Management Program gives 180 days of coverage, but mainly to people separating involuntarily or in certain other situations. If you’re leaving after one enlistment or a few, price civilian coverage before your last day.
Common mistakes
- Declining SBP to save the premium without comparing it with real life insurance quotes.
- Taking the lump sum without a use for it that earns more than the retired pay it replaces.
- Cashing out the TSP at separation and paying income tax, plus a 10% additional tax if you’re young, on money meant for retirement.
- Filing the VA claim late and missing months of tax-free pay.
- Missing the 90-day TRICARE enrollment window after retirement.
- Planning the civilian job but not the household: a spouse’s career, where you’ll settle and the state tax on retired pay there.
- Starting a federal civilian job without a plan for both pensions. FERS and your military service interact, and our guide for federal employees covers the FERS side.
Questions to ask an advisor
| Ask | A good answer includes |
|---|---|
| How many military retirees or separating members have you worked with? | A number, and the retirement systems they were under |
| Would you have us take full SBP coverage? | A comparison with life insurance quotes and your spouse’s other income |
| What would the BRS lump sum cost me over my life? | The lump sum against the retired pay given up, year by year to age 67 |
| What should I do with my TSP? | Fund costs compared, and a plan for any tax-exempt balance |
| How are you paid, in dollars? | One figure, and no commissions on insurance or annuities |
The last question matters because separating members are often offered life insurance and annuities by people paid to sell them. A fee-only advisor is paid only by you. Our guide to warning signs covers what a sales pitch looks like.
When a fee-only advisor is worth it, and what it costs
Start with what’s free. Military OneSource offers free financial counseling to service members and eligible family members, and it’s a good place for budgeting, debt and a first look at the transition. A paid planner earns the fee on the elections above, when the numbers are large and the choices are permanent: SBP, the lump sum, two pensions, or a spouse whose income changes everything.
Fee-only planners who publish prices charge:
- One-time plan: a median of $2,000, middle half $845 to $3,600. It suits a single deadline, such as a retirement date. See one-time plan costs.
- Hourly: a median of $300 an hour, for a review of one election. See hourly planner costs.
- Ongoing planning: a median of $4,500 a year, if you want help through the first civilian years.
Book the work at least six months before your retirement date, so the plan can shape the elections rather than explain them.
How to find one
Start with the pension planning specialty, which covers military retirement elections, or the list of pension planning specialists in the public graph. If you’re leaving later in your career, advisors for pre-retirees and the retirement planning specialists list also fit; if you’re leaving after a few years and starting over, see advisors for mid-life transitions. Our guide to retirement advisors covers Social Security timing and the tax years before required distributions.