Financial Advisor for Military Members and Veterans

For informational purposes only — not tax, legal, or investment advice. Your situation may differ.

Military retirement income is almost entirely outside the AUM model. A High-3 or BRS pension pays a fixed monthly check from DFAS — no account balance, no management fee. VA disability compensation is tax-free income excluded from gross income — no AUM advisor can charge on it. The TSP is held at a government custodian most independent advisors cannot bill assets against directly.

The result: a service member who retires at 42 with a $36,000/year pension, $1,000/month in VA disability, and $280,000 in TSP has most of their financial life in buckets an AUM advisor cannot reach. What they actually need — BRS vs. High-3 final analysis, SBP election modeling, Roth TSP conversion strategy, TRICARE-to-Medicare coordination, and a clear tax plan integrating tax-free and taxable income — is planning work that flat-fee and hourly advisors are structured to deliver.

BRS vs. High-3: The Pension Structure

Service members who entered active duty on or after January 1, 2018 are automatically in the Blended Retirement System (BRS). Those who entered before December 31, 2017 are in the legacy High-3 system (unless they opted into BRS during the 2018 opt-in window).

• Legacy High-3: A defined-benefit pension paying 2.5% × years of service × average of the highest 36 months of basic pay. At 20 years, that is 50% of high-3 pay. At 30 years, 75%. No government TSP contribution. The entire retirement benefit is the pension check.
• Blended Retirement System (BRS): A lower defined-benefit pension — 2.0% × years × high-3 basic pay, so 40% at 20 years — combined with TSP matching. DoD automatically contributes 1% of basic pay to TSP after 60 days of service, and matches service member contributions dollar-for-dollar on the first 3% of pay plus 50 cents on the dollar for the next 2%. When a service member contributes 5% of basic pay, total government contributions reach 5%, for a combined 10% going into TSP.¹ BRS also includes Continuation Pay — a mid-career bonus at 12 years of service in exchange for an additional service commitment.

The pension difference at 20 years is meaningful: High-3 pays 50% of high-3 pay; BRS pays 40%. For an O-5 (lieutenant colonel or commander) retiring at 20 years with a $7,000/month average basic pay, that is a $700/month difference — $8,400/year — for life. Whether the TSP matching available under BRS closes that gap depends on contribution rate, investment return, and career length. For most members who contribute at least 5% throughout their career, BRS TSP accumulation partially offsets the pension reduction, though the break-even timeline extends well into retirement.

For BRS members: maximizing TSP contributions to capture the full DoD match is essential. Leaving DoD matching on the table under BRS compounds the pension differential you already accepted.

TSP Contribution Limits for 2026

The Thrift Savings Plan follows the same IRS elective deferral limits as 401(k) and 403(b) plans. For 2026, the limit is $24,500.²

Service members can allocate contributions between traditional TSP (pre-tax, taxable withdrawals) and Roth TSP (after-tax, tax-free qualified withdrawals). Roth TSP has no income limit — unlike Roth IRA contributions, which phase out at $242,000–$252,000 for married filers in 2026. For officers or senior NCOs who exceed the Roth IRA income threshold, Roth TSP is the primary route to tax-free retirement savings.

SECURE 2.0 § 325 eliminated lifetime required minimum distributions from Roth 401(k) and Roth TSP accounts beginning January 1, 2024. A military retiree with Roth TSP assets is never forced to take distributions — unlike traditional TSP, which faces RMDs starting at age 73 (born 1951–1959) or 75 (born 1960+). For a service member who retires at 42 with a 40-year retirement runway, Roth TSP's tax-free compounding without RMD pressure is structurally valuable.

Combat zone Roth TSP opportunity: Combat pay exclusion under 26 U.S.C. § 112 makes combat zone pay tax-free. TSP contributions made from excluded combat pay are deposited into the Roth TSP, are after-tax from the government's perspective, and grow tax-free — double tax-free treatment. Service members with combat zone deployments should maximize Roth TSP contributions during those periods.

VA Disability Compensation: Tax Planning Implications

VA disability compensation is excluded from gross income under 26 U.S.C. § 104(a)(4), regardless of disability rating (0% through 100%). It is not earned income for IRA contribution purposes, does not trigger Social Security taxation calculations, and does not count toward IRMAA income thresholds for Medicare Part B surcharges.³

Concurrent Retirement and Disability Pay (CRDP): Veterans who retired with 20 or more years of qualifying service and hold a combined VA disability rating of 50% or higher can receive their full military retired pay alongside their full VA disability compensation simultaneously. The prior dollar-for-dollar offset between the two has been phased out for eligible veterans.

Combat-Related Special Compensation (CRSC): Veterans with combat-related disabilities can elect CRSC — a tax-free monthly benefit paid by the military service branch — as an alternative to the taxable portion of retired pay. CRSC can provide meaningful tax savings for veterans in higher brackets whose combat-related disability represents a significant share of their total compensation. A flat-fee advisor can model whether CRDP or CRSC is more favorable given a veteran's specific rating structure and effective tax rate.

The AUM planning implication: VA disability is a significant income stream. The average monthly payment for veterans with 100% disability ratings exceeds $4,000/month in 2026. That income stream has no investable account balance and cannot be brought under AUM management. An AUM advisor gains no revenue from optimizing how VA disability interacts with taxable retired pay, Roth conversion strategy, or IRMAA thresholds. A flat-fee advisor's compensation is the same regardless.

Survivor Benefit Plan (SBP): One of Retirement's Biggest Decisions

At military retirement, a service member with a dependent spouse must decide whether to elect the Survivor Benefit Plan — and at what coverage level. The election window closes at retirement and is largely irrevocable afterward.

The SBP pays a surviving spouse 55% of the elected base amount (up to the full retired pay) for life. The premium is 6.5% of the elected base amount, deducted from gross retired pay before federal income taxes — so SBP premiums reduce taxable income in each year they are paid.⁴ After 30 years of premium payments, or when the retiree reaches age 70 (whichever is later), coverage becomes "paid up" — premiums stop but the benefit continues for life.

The SBP decision requires weighing several competing factors:

• In favor of SBP: Survivor income is inflation-adjusted (cost-of-living increases in step with retired pay increases). The benefit is guaranteed regardless of investment returns or portfolio drawdown. SBP-covered surviving spouses maintain TRICARE eligibility — including TRICARE For Life at 65, which wraps around Medicare and eliminates most out-of-pocket medical costs. The coverage requires no underwriting — a veteran with health conditions that make life insurance expensive or unavailable gets the same SBP terms.
• Against SBP: If the veteran outlives the spouse, premiums paid over decades produce no benefit. If the couple has sufficient other assets (large IRA/brokerage, spouse's pension or Social Security), a $4,200/month military pension's 55% survivor benefit may be less critical than for a couple whose primary income is the military retirement.
• VA disability interaction: VA disability is not included in the SBP base amount calculation. A veteran receiving $2,000/month in VA disability and $3,500/month in retired pay who elects full SBP coverage is paying 6.5% of $3,500/month — $227.50 — and securing a $1,925/month survivor benefit from the pension portion, while the VA disability passes separately to the surviving spouse's own benefit status.

The SBP/no-SBP decision has $200,000–$500,000 in expected lifetime value depending on health and longevity assumptions. An hourly flat-fee engagement at $1,000–$2,000 to model this decision with actual numbers is one of the highest-return advisory engagements available to retiring service members.

TRICARE to Medicare: The Transition at 65

Military retirees and their covered dependents maintain TRICARE throughout retirement. The coverage structure changes at Medicare eligibility:

• Before 65 (military retirement): TRICARE Retiree — continued coverage with modest premiums and standard cost-sharing.
• At 65: Military retirees must enroll in Medicare Part A and Medicare Part B to maintain TRICARE. Once enrolled in both parts of Medicare, coverage automatically transitions to TRICARE For Life (TFL), which pays after Medicare as a secondary payer. For most covered services, Medicare pays first, TFL pays the remainder — resulting in effectively zero out-of-pocket cost for covered services.

The Medicare Part B premium in 2026 is $202.90/month at the base income tier (MAGI at or below $109,000 for single filers, $218,000 for married filing jointly).⁵ IRMAA surcharges can add $81–$487/month per person above that base for higher-income retirees. Because IRMAA uses MAGI from two years prior, income management in the years before Medicare enrollment has direct consequences for Part B costs.

Service members who retire early — at 42 to 48 — have a 17- to 23-year window between retirement and Medicare enrollment. That window is one of the most valuable Roth conversion opportunities in the tax code: taxable income is typically lower (the pension check is predictable, TSP is not yet in distribution), there are no RMD obligations yet, and each year of Roth conversion reduces future traditional TSP or IRA balances that will eventually create forced distributions and IRMAA exposure. Roth conversion strategy and IRMAA coordination are covered in detail here.

Social Security for Military Retirees and Spouses

Active-duty military service from 1957 onward is Social Security-covered employment. Service members who accumulate 40 Social Security credits are entitled to SS retirement benefits independent of their military pension — the military pension is not a "non-covered government pension" for WEP/GPO purposes. Military retirees are generally entitled to their full earned Social Security benefit.

The more significant WEP/GPO change affects military spouses who worked in non-Social-Security-covered employment — certain state and local government jobs, some school districts, or other public-sector positions. The Social Security Fairness Act (P.L. 118-210), enacted January 5, 2025, fully repealed the Windfall Elimination Provision and the Government Pension Offset. Spouses who were previously offset or eliminated from spousal or survivor Social Security benefits due to their own government pension now receive their full benefit.⁶ This particularly affects military families where one spouse had a teaching or other public-sector career.

For the service member's own Social Security, the claiming strategy — at 62, full retirement age (67 for those born 1960+), or delayed to 70 — interacts with the military pension amount, Roth TSP distributions, and IRMAA thresholds. A service member who begins drawing the military pension at 42 has a 20–28 year window before SS claiming begins. Roth conversions during that window that reduce future taxable income also reduce the share of SS benefits subject to federal income tax (up to 85% of SS benefits are taxable above $44,000 combined income for joint filers).

The AUM Advisor Structural Mismatch

Consider a 20-year Navy O-6 (captain) retiring at 44: a pension of $4,200/month, $800/month VA disability (30% combined rating), $260,000 in TSP, and $75,000 in a personal brokerage account. An AUM advisor reviewing this picture:

• Cannot charge on the pension — it is a DFAS payment.
• Cannot charge on VA disability — it is a tax-free government payment.
• Cannot easily bill on TSP — it is held at a government custodian outside their platform.
• Can only charge AUM on the $75,000 brokerage account — approximately $750/year at 1%.

The incentive to recommend rolling TSP into an IRA at retirement is structurally present: a $260,000 TSP-to-IRA rollover brings the AUM fee from $750/year to $3,350/year. Whether that rollover is actually in the veteran's interest — TSP maintains access to the G Fund (a unique government securities fund with no credit or interest rate risk), holds institutional-class expense ratios, and may carry favorable creditor protection rules — is a separate question from whether it benefits the advisor. The rollover decision framework for government plan participants is covered here.

A flat-fee advisor charges the same fee whether the TSP stays in place, rolls to an IRA, or stays split across multiple accounts. Their only stake is providing good analysis.

What a Flat-Fee Advisor Does for Military Members

• BRS contribution optimization — Ensure TSP contributions are structured to capture the full DoD match. For BRS members, leaving matching on the table is especially costly given the reduced pension formula.
• Roth vs. traditional TSP allocation — Model current vs. future tax rates, identify combat zone contribution opportunities, and plan the pre-Medicare Roth conversion window. Roth conversion strategy explained here.
• SBP election modeling — Run actuarial cost-benefit analysis with real numbers: premium cost, spousal age differential, VA disability interaction, TRICARE survivor eligibility, alternative life insurance availability, and asset position.
• TSP rollover decision at separation or retirement — Model whether TSP-to-IRA rollover is worthwhile: G Fund access, institutional expense ratios, creditor protections, vs. IRA investment flexibility and estate planning features.
• IRMAA and Medicare Part B planning — Map the Roth conversion window to minimize IRMAA surcharges at Medicare enrollment, coordinating pension income, VA disability (excluded), and traditional TSP/IRA distributions.
• VA disability + CRDP/CRSC optimization — For veterans receiving both retired pay and VA disability, model whether CRDP (concurrent receipt) or CRSC (tax-free alternative for combat disabilities) produces a better after-tax outcome. CRSC election requires a separate application to the military service branch.
• Tax-free income integration — Build a comprehensive retirement income picture across the pension (taxable), VA disability (tax-free), Roth TSP (tax-free), traditional TSP/IRA (taxable), and Social Security (up to 85% taxable). Sequencing these sources affects IRMAA, SS benefit taxation, and QCD eligibility.
• SCRA protections during active service — The Servicemembers Civil Relief Act caps interest rates on pre-service debts at 6% during active duty. For reservists and National Guard members called to active duty, identifying eligible accounts and submitting SCRA requests can produce immediate savings.

What This Engagement Costs

For a service member retiring with a $4,200/month pension, the SBP election alone — whether to pay $273/month in premiums (6.5% of $4,200) for a $2,310/month survivor benefit — has $200,000–$400,000 in expected lifetime value depending on longevity. A $1,500–$3,000 advisory engagement to model this single decision with actual numbers and actuarial assumptions is one of the highest-return uses of planning fees available.