Financial planning for
military service members.
The Thrift Savings Plan, the Blended Retirement System, tax-free BAH, the VA home loan, and the unique financial advantages and challenges of military service. Specific and practical.
This page covers US-specific accounts and tax law. Outside the US? The priority order is the same, the account names differ (ISAIndividual Savings Account (ISA)A UK tax-advantaged account where contributions are post-tax but all growth and withdrawals are tax-free.Full definition in the UK, TFSATax-Free Savings Account (TFSA)A Canadian tax-advantaged account where contributions are post-tax but all growth and withdrawals are tax-free.Full definition/RRSPRegistered Retirement Savings Plan (RRSP)A Canadian tax-deferred retirement account; contributions reduce taxable income and growth is tax-deferred until withdrawal.Full definition in Canada, Super in Australia, etc.).
Max the TSPThrift Savings Plan (TSP)The retirement savings plan for federal government employees and military members, similar to a 401k with extremely low-cost index funds. Roth up to the match, then up to the annual limit if you can. Use the VA home loan. Understand BAH as tax-free income when you compare offers. If you are in the Blended Retirement System, capture the government match on TSP contributions. Plan the transition before it happens.
The Thrift Savings Plan (TSP)
The government's version of a 401(k). Same contribution limits as a 401(k): $24,500 for 2026 verify×DON'T TRUST, VERIFYClaim: TSP elective deferral limit matches 401(k); 2026 projected $24,500.Verify at: tsp.gov ↗ Source 1 in the list belowIndexed annually; TSP publishes limits each year..
Investment options
- G Fund: government securities, ultra-safe, low return
- F Fund: bond index fund
- C Fund: S&P 500 equivalent
- S Fund: small-cap index
- I Fund: international index
- L Funds: lifecycle/target date funds
For most: a C Fund + S Fund combination weighted toward C mirrors a total US market allocation. Or an L Fund for simplicity.
Traditional vs Roth TSP: same decision logic as Traditional vs Roth 401(k). See Roth vs Traditional. Deployed in a combat zone tax-exclusion month? Roth TSP contributions from that income come out completely tax-free later.
Blended Retirement System vs Legacy
If you joined on or after January 1, 2018, you are automatically in BRS. If you joined before and had a choice, you know which side you picked.
- During service1% automatic + up to 4% matchup to 5% total into your TSP from the government
- 7 to 12 yearsContinuation pay option
- 20 yearsPension: ~40% of basesmaller, traded for the TSP money
- During serviceNo TSP match
- ~12 yearsNothing if you leave now
- 20 yearsPension: 50% of baselarger, but all-or-nothing
- Lower pension at 20 years (~40% of base at 20) verify×DON'T TRUST, VERIFYClaim: BRS pension multiplier is 2.0% per year (40% at 20 years), vs 2.5% (50% at 20 years) under legacy High-3.Verify at: militarypay.defense.gov BRS ↗ Source 2 in the list belowDoD-authoritative source for retirement system rules.
- Automatic 1% TSP contribution from government
- Government matches up to 4% more (up to 5% total from the government)
- Continuation pay option between 7 and 12 years of service
- 50% of base salary at 20 years
- No TSP match
- All-or-nothing: full pension at 20 or nothing earlier
Key military benefits
Basic Allowance for Housing. Not taxable income verify×DON'T TRUST, VERIFYClaim: BAH and BAS are tax-free allowances under IRC Section 134.Verify at: DFAS BAH tables ↗ Source 3 in the list belowIRC 134 exempts military allowances from federal tax.. When comparing a civilian offer to an active-duty package, gross-up BAH and BAS by your effective tax rateeffective tax rateYour actual average tax rate, total tax paid divided by total income. Always lower than your marginal rate.Full definition to compare apples to apples.
No down payment, no PMI, competitive rates. One of the most valuable benefits available. Available after qualifying service. va.gov ↗
Savings Deposit Program. During deployment in designated combat zones, up to $10,000 earns guaranteed 10% annually verify×DON'T TRUST, VERIFYClaim: SDP offers 10% guaranteed annual interest on up to $10,000 during qualifying combat zone deployment.Verify at: DFAS SDP ↗ Source 4 in the list belowEnrollment required during deployment.. Take advantage of this.
Education benefit. Transferable to spouse or children after qualifying service. va.gov/education ↗
Transition planning
Military service provides significant structure and benefits. Leaving can be financially disorienting. Plan the transition 12 to 24 months before it happens, not after.
- Healthcare: TRICARE ends unless you retire and enroll within 90 days. Plan for civilian healthcare costs.
- Pension: understand your exact monthly payment if retired.
- TSP: roll over or leave. Leaving is fine. Plan for future RMDsRequired Minimum Distribution (RMD)The minimum the IRS requires you to withdraw each year from traditional IRAs, 401(k)s, and similar accounts, generally starting at 73, or 75 if born in 1960 or later. It equals the prior December 31 balance divided by an IRS life expectancy factor. Roth IRAs and Roth 401(k)s have no RMDs during the owner's lifetime..
- GI Bill: understand transfer options if not using personally.
- VA disability: file the claim process before separation.
Where to go from here
Sources
Verify badges in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.
- Thrift Savings Plan, Home | The Thrift Savings Plan (TSP) ↩
- militarypay.defense.gov BRS ↩
- DFAS BAH tables ↩
- DFAS SDP ↩
- U.S. Department of Veterans Affairs, VA-Backed Veterans Home Loans | Veterans Affairs
- U.S. Department of Veterans Affairs, VA Education And Training Benefits | Veterans Affairs
Last updated . Not financial advice. Confirm current benefits on DoD and VA sites. Disclosures · How pages are reviewed