The Veterans Retirement Blueprint

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Why federal and military retirement is harder than it looks

A veteran we worked with had it mapped out in one line: "Pension, TSP, VA check — I'm set." Then he sat down with the actual numbers and found a handful of decisions he had never weighed, each one worth real money. A sick-leave balance he was about to forfeit by separating the wrong way. A stretch of low-income years that was the most valuable tax window he would ever own, sitting unused. A VA check his plan was quietly under-counting because it never showed up on a tax return.

Military and federal retirement is its own animal. Your income doesn't arrive as one number — it arrives in four streams that each behave differently, and the gap between the gross total and what lands in the account is where the surprises live. You may walk out the door years before Social Security starts, so the pension, the TSP, and the VA comp have to carry a long bridge. And the state you retire to can quietly reset the whole math. This briefing walks the five decisions that move the most money, and for each one points you to the tab in the free Veterans calculator where you see your own number.

Decision 1 — The FERS annuity and the unused-sick-leave trap

The problem. Most federal folks know the FERS pension is "1% times your high-3 times your years." What surprises people is how much the small print moves the check. First, the multiplier has a hidden upgrade: if you walk out the door at age 62 or later with at least 20 years of service, that 1% becomes 1.1% — a 10% bump on the whole annuity, for the rest of your life. Retire the Friday before you turn 62, or one month short of 20 years, and you didn't catch it. Second, and this is the one that quietly costs people the most: your unused sick leave. Under FERS, the hours you never burned get converted to creditable service at 2,087 hours to the year and added to your annuity — but only if you retire on an immediate annuity. Separate first and take a deferred annuity later, and every one of those hours is forfeited. A long-tenured employee can be sitting on 2,000 or 3,000 hours — close to a full extra year of service — and lose all of it by leaving the wrong way.

There's a bridge most people don't plan for, too. Retire before 62 with the years to qualify and FERS pays a Special Retirement Supplement — a monthly bridge that roughly approximates the Social Security you earned in federal service, paid until 62. But it is fragile: it stops at 62, and before then it is subject to an earnings test — earn over the annual wage limit (about $24,480 in 2026) from a job and the supplement is cut $1 for every $2 over.

Find your number. The FERS Annuity + Sick Leave tab takes your high-3, years and months of service, unused sick-leave hours, age at separation, and your path — "retire now as an employee" versus "separate first, defer." It shows your estimated annual annuity, the sick leave converted to service, the multiplier applied (so you can see whether you caught the 1.1%), and the difference the sick-leave credit makes. Flip the path selector and watch the credit drop to zero — that swing is what walking out the wrong way costs you.

Why a number isn't a plan. The tab shows the size of the sick-leave credit and whether your date catches the 1.1% multiplier. It can't tell you whether holding a few extra months to clear 20 years at 62 is worth it for your life, or how the Special Retirement Supplement and its earnings test fit your second-act plans. A date on a calculator is a fact; the right date is a decision.

Decision 2 — The Roth conversion window: the quiet years before RMDs

The problem. There is usually a stretch between the day the paychecks stop and the day Required Minimum Distributions force money out of your traditional accounts — at 73, or 75 if you were born in 1960 or later. For a lot of veterans that stretch is wide open, and on paper it looks like a lean year. It is actually the most valuable tax year you will ever own. In those low-income years you can move pre-tax TSP, IRA, or 457 money into a Roth and pay tax now, at a low bracket, instead of letting the balance compound into a much larger RMD — and tax bill — a decade later. Convert too little and you waste the window; convert too much and you spill over your target bracket or trip the IRMAA Medicare surcharge, which in 2026 kicks in at $109,000 of income for a single filer and $218,000 married, reaching back two years to set your premium.

There is a second layer most veterans never get told about: where you live. In Connecticut and New York, your military retired pay is 100% state-exempt, no income limit. That keeps your "countable" income low, which can mean more room to convert before any state ceiling erodes. In Florida there is no state income tax at all. The state you retire to is not a footnote — it quietly resets how much of this window you can use.

Find your number. The TSP Roth Conversion Window tab returns an illustrative amount you could convert this year, then shows exactly which ceiling is binding — your federal bracket, the IRMAA tier, or your state exemption — and the rough federal tax on a full-room conversion. The room it reports is always the lowest of the three ceilings, so it's a number you could act on without overflowing any of them.

Why a number isn't a plan. A single year's conversion room is one move. A conversion strategy is a multi-year sequence, threaded against when your pension and Social Security turn on, the state exemption you're preserving, the IRMAA cliffs, and the year your RMDs begin.

One note on the stay-vs-roll question, because it sits right next to this one: the TSP is hard to beat on cost — the G Fund exists nowhere else, and the TSP reports total expenses around 0.034% on it, lower than most options anywhere. An IRA gives a wider menu, often at higher cost. If you became a client and rolled TSP assets to Sirmium, the firm could earn a fee on them — so we'd put the TSP's low cost and the IRA's flexibility side by side before any rollover. A Roth conversion inside the TSP and a rollover out of the TSP are two different decisions.

Decision 3 — Your VA rating, valued the right way

Read this first. Whether a condition qualifies for a VA rating, and at what percentage, is decided solely by the VA — a medical and procedural call. This section does not check eligibility, predict a rating, or tell anyone to pursue one. It does one thing: it shows the dollar value of a rating you already have, so it can take its proper place in your income plan.

The problem. A veteran with a VA rating is usually carrying a stream of income that never shows up the way it should in a plan, because it never shows up on a tax return. VA disability compensation is excluded from gross income — no federal tax, and because every state starts from federal income, no state tax either. So a dollar of tax-free VA compensation is worth more than a dollar of pension or traditional-TSP withdrawal, which get taxed on the way out. The same blind spot shows up on the VA home loan, where a veteran receiving compensation is generally exempt from the funding fee. And when military retired pay and VA compensation collide, the law historically offset one against the other dollar-for-dollar — CRDP (taxable, automatic at a 50%-or-higher rating with 20-plus qualifying years) and CRSC (tax-free, combat-related, applied for) exist to restore it.

Find your number. The VA Disability Value tab takes a rating you already have, your dependent status, and your marginal tax rate, and shows your tax-free monthly and annual VA compensation, the equivalent taxable income you'd need to net the same money, and the home-loan funding fee you'd save as an exempt veteran. At the default 50% veteran-alone rating it reads about $1,132.90 a month (roughly $13,595 a year tax-free); at 100% with a spouse it's $4,158.17 a month. Change the rating and dependent status and watch the value move.

Why a number isn't a plan. Knowing what a rating is worth tax-free is the easy half. The planning is what you do with it: leaning on the tax-free stream so you can leave a traditional TSP alone in a high-bracket year, sizing a Roth conversion in the room it leaves open, or weighing CRDP against CRSC if retired pay and VA comp are colliding in your case.

Decision 4 — Your real retirement paycheck: pension, TSP, Social Security, and VA, stacked

The problem. Your gross pension is not your paycheck. A military retiree's income arrives in four streams that each behave differently. Military retired pay is federally taxable. A TSP draw is taxable if traditional, tax-free if Roth. Social Security is partly taxable — but it is not reduced by your military pension (military service pensions never triggered the old WEP/GPO offsets). And VA disability compensation is completely tax-free and stacks on top of everything. Where you retire changes the math more than people expect: Connecticut and New York exempt military retired pay 100% and exempt Social Security from state tax; Florida takes no state income tax at all. The same four streams, moved across a state line, can net a meaningfully different paycheck.

One more wrinkle the gross number hides: concurrent receipt. A 20-plus-year retiree with a VA rating of 50% or higher can collect full retired pay and full VA comp under CRDP — they stack. Under a 50% rating without CRDP or CRSC, the old VA waiver can still offset retired pay dollar-for-dollar. Same gross on paper, very different net in the bank.

Find your number. The Military Paycheck tab stacks your retired pay, TSP withdrawal, Social Security, and VA disability, subtracts a rough federal and state estimate, and shows your estimated net monthly income and effective tax rate. Change your state from Connecticut to Florida to New York and watch the state line — and the net — move.

Why a number isn't a plan. Seeing the four streams stack into one net number is the easy part. The plan is in the levers: how hard to lean on the traditional-TSP draw versus pacing Roth conversions, when to claim Social Security, whether a move across a state line is worth it, and how concurrent receipt applies to your record.

Decision 5 — The Survivor Benefit Plan: the near-permanent call on your way out

Read this first. There is no calculator tab for this one — and that is the point. The Survivor Benefit Plan is not a number you look up. It is a near-permanent decision you make once, on a short clock, and then live with for the rest of your life.

The problem. Your military retired pay stops the day you die. SBP is the election that turns part of it into a lifetime, inflation-adjusted check for your spouse. Decline it, and your spouse gets nothing from your pension. Elect it, and 6.5% of the base amount you choose comes out of your retired pay every month while you're alive, and 55% of that base amount goes to your survivor for life, rising with annual cost-of-living adjustments. Three things turn this into a trap rather than a checkbox. First, the clock and the lock: the election is made at retirement and is generally irrevocable — there is one narrow window, between the 25th and 36th month after you enroll, to back out, and even that requires your spouse's written, notarized concurrence. Second, the default works against the inattentive: if you're married and do nothing, the law enrolls you in full spouse coverage automatically. Third, people compare it to the wrong thing — SBP is partially subsidized and carries a COLA that a fixed term-life policy does not, but term life can be cheaper while the kids are young. Neither is automatically right.

See the cost on the paycheck. There's no SBP tab, but the number it eats is right there: open the Military Paycheck tab and picture 6.5% of your base amount coming out of the retired-pay line every month, against 55% of that base amount — COLA-adjusted — landing in your spouse's hands the month after you're gone. Seeing the live cost against the live paycheck is what makes the question concrete.

Why a number isn't a plan. The premium is arithmetic. The election is not. Whether to take SBP, how much base amount to cover, and whether term life carries part of the load turns on your health, your spouse's age and her own benefits, your other assets — and the fact that this is one of the few money decisions you genuinely cannot take back. Bring this one to the call before you sign your retirement papers, not after.

Bring three numbers, and 15 minutes is plenty

The blueprint names the five decisions. The calculator shows you your numbers — free, no strings, run it as many times as you like. But a number is not a plan. A sick-leave credit, a conversion ceiling, a tax-free VA stream, a four-part paycheck, an SBP election — each only becomes a plan when it's read in the context of everything else you have going on, and sequenced in the right order. To start that, bring:

1. Your TSP balance and type (traditional, Roth, or both)
2. Your DFAS retired-pay figure or High-3 and years of service
3. Your VA award letter and any other accounts — an IRA, a spouse's FERS or TSP

Frequently Asked Questions

When does the FERS annuity multiplier increase to 1.1%?

If you retire at age 62 or later with at least 20 years of service, the FERS multiplier becomes 1.1% instead of 1% — a 10% larger annuity for life. Retire one month short of 20 years, or just before turning 62, and you keep the 1% computation.

Can unused sick leave be lost in FERS retirement?

Yes. Under FERS, unused sick leave is converted to creditable service at 2,087 hours per year and added to your annuity — but only if you retire on an immediate annuity. Separate first and take a deferred annuity later, and every one of those hours is forfeited.

Is VA disability compensation taxable?

No. VA disability compensation is excluded from gross income — no federal tax, and because states start from federal income, no state tax either. That makes a dollar of tax-free VA compensation worth more than a dollar of pension or traditional-TSP withdrawal. Veterans receiving compensation are also generally exempt from the VA home-loan funding fee.

What is the Roth conversion window for veterans?

It is the low-income stretch between the last paycheck and Required Minimum Distributions at age 73 (75 if born in 1960 or later), when you can convert pre-tax TSP or IRA money to Roth at a low bracket — watching the IRMAA surcharge ($109,000 single / $218,000 married in 2026) and using state exemptions on military retired pay where they apply.

What is the difference between CRDP and CRSC?

Both restore retired pay that the old VA waiver offset. CRDP is taxable and generally automatic at a 50%-or-higher combined rating with 20-plus years of qualifying service. CRSC is tax-free but combat-related and must be applied for. You cannot collect both at once, and the election is made annually.

How does the Survivor Benefit Plan (SBP) work, and can the election be changed?

SBP turns part of your retired pay into a lifetime, COLA-adjusted check for your survivor: you pay 6.5% of the base amount you elect, and your survivor receives 55% of it for life. The election is made at retirement and is generally irrevocable — one narrow window between the 25th and 36th month after enrollment allows withdrawal, with your spouse's written, notarized concurrence. Married and do nothing, and the law enrolls you in full spouse coverage automatically.