Retirement planning for veterans starts with a skill you already have: planning for the moment the first plan fails. You never stepped off on a mission without a backup. Your retirement deserves the same discipline, because veterans face retirement decisions that most civilians never have to make, and some are hard or impossible to undo.
Key takeaways
- A veteran’s retirement income usually comes from several sources, each with its own rules: retired pay, VA compensation, the TSP, a second career and Social Security.
- Plan it like a mission, in four layers: Primary, Alternate, Contingency and Emergency (PACE).
- The Survivor Benefit Plan, TRICARE For Life and Medicare Part B, and your TSP withdrawal plan are decisions to make on purpose, not by default.
First, thank you
To every veteran, and to every spouse, parent and child who served right alongside them: thank you. Your service cost more than most people will ever know. May God bless you and the families who stood with you.
If you never wore the uniform but love someone who did, this article is for you too. Share it with them.
Why retirement planning for veterans is different
A veteran’s retirement rarely looks like a single paycheck that stops at 65. It’s usually a patchwork, and each piece has its own rules:
- Military retired pay with annual cost-of-living adjustments, if you served 20 years or more.
- VA disability compensation, if you have a service-connected rating. It’s generally tax-free.
- The Thrift Savings Plan (TSP), which matters even more under the Blended Retirement System, where the pension is figured at 2.0% per year of service instead of 2.5%.
- A second career, often with its own pension or 401(k), especially if you retired from service in your 40s.
- Social Security, which you’ll still decide when to claim.
- Decisions only veterans face: the Survivor Benefit Plan, TRICARE and TRICARE For Life, VGLI and, for federal employees, the military service deposit.
Many officers also retire from the military years, often decades, before they stop working entirely. That means two retirements to plan, and a retirement that may need to last 30 years or more.
Plan your retirement like a mission: the PACE method
In the military, critical plans are often built in four layers, known as a PACE plan: Primary, Alternate, Contingency and Emergency. If the primary way fails, everyone already knows the next move.
Most retirement plans stop after the first two layers. They answer “where will my income come from?” but not “what happens when that doesn’t work?” Here’s how the four layers apply to a veteran’s retirement:
| Layer | In a veteran’s retirement | The question to ask |
|---|---|---|
| Primary | Income you can count on: military retired pay, VA disability compensation, Social Security, any second-career pension | Does it cover your essential bills on its own? |
| Alternate | The savings you draw from: your TSP, a civilian 401(k), an IRA | How much can you take each year without running it down too fast? |
| Contingency | A plan for a market drop in your first years of withdrawals | If your accounts fell 20% the year you retire, where would next year’s income come from? |
| Emergency | A plan for a death, a serious health event or a gap in health coverage | What would your spouse live on? What would pay for care? |
Let’s walk through it with an example. Mark retired from the Army as a lieutenant colonel, then worked a second career with a defense contractor. Now 63, he’s ready to retire for good. His wife, Denise, is 62. Their essential bills are $6,000 a month, and they’d like $8,000 a month to live comfortably.
Hypothetical couple for illustration. Amounts are monthly, before taxes and simplified.
P: Primary income
Your Primary layer is the income that arrives whether the market is up or down. For a military retiree, retired pay is the anchor of that layer, and its annual cost-of-living adjustments help it keep pace with rising prices. VA disability compensation, Social Security and any second-career pension sit beside it.
The goal is simple: know whether your reliable income covers your essential bills, like housing, food, utilities, insurance and healthcare. If it does, the rest of your plan has room to breathe. If it doesn’t, every other layer is carrying weight it wasn’t built for.
Mark and Denise: Mark’s retired pay ($3,000), his Social Security ($2,000) and Denise’s Social Security ($1,000) add up to $6,000 a month. Their Primary layer covers their essential bills on its own. That’s a strong foundation.
A: Alternate income
Your Alternate layer is your savings: the TSP, a civilian 401(k) from a second career, or an IRA. This is the money you draw from to fill the gap between your Primary income and the life you want. If you have both a uniformed services TSP account and a civilian TSP account, they’re separate accounts, and you may be able to combine them to simplify withdrawals.
Two questions matter here. How much can you withdraw each year without draining the account too early? And how much of each withdrawal goes to taxes? Money in traditional, pre-tax accounts is generally taxed as ordinary income when you take it out.
For the first question, many planners start with the “4% rule.” Research in the 1990s found that withdrawing about 4% of savings in the first year, then adjusting that amount for inflation, historically lasted about 30 years. It’s a starting point, not a guarantee. The right rate depends on markets, fees, taxes, how long you live and how flexible your spending is.
Mark and Denise: They have $600,000 across Mark’s TSP and his civilian 401(k). A 4% first-year withdrawal is $24,000, or $2,000 a month, which brings them to their $8,000 target. But that withdrawal is taxable. If 15% to 20% goes to federal and state taxes, only about $1,600 to $1,700 a month actually reaches their checking account.
C: Contingency
Your Contingency layer answers the question nobody wants to ask in a good year: what if the market drops just as you start withdrawing?
Losses early in retirement hurt more than the same losses later, because you’re selling investments while they’re down to pay your bills. That’s called sequence of returns risk, and it can leave two people with the same savings and the same average returns in very different positions.
In one hypothetical, two retirees each start with $750,000, withdraw $40,000 a year and earn the exact same five annual returns, just in opposite order. After five years, the one who saw the losses first has $80,818 less.
A Contingency plan decides ahead of time where income comes from in a down year. No strategy eliminates market risk, but a plan made in advance beats a decision made in a panic.
Mark and Denise: Say the market falls 20% in their first year. Their $600,000 becomes $480,000, and the same $24,000 withdrawal is now 5% of what’s left, taken while prices are down. Their Contingency plan: keep about two years of withdrawals, roughly $48,000, in a stable option such as the TSP’s G Fund, and draw from that in a down year so the rest has time to recover.
E: Emergency
Your Emergency layer is the plan for the hardest days, and it’s where a veteran’s choices matter most.
- A death. Military retired pay stops when the retiree dies. The Survivor Benefit Plan (SBP) is what lets a spouse keep part of it for life. Full spouse coverage generally costs 6.5% of the base amount you choose and pays your spouse 55% of that base, with cost-of-living adjustments. Social Security also drops: a surviving spouse generally keeps the larger of the two checks, not both.
- A serious health event. Neither Medicare nor TRICARE For Life generally covers long-term custodial care, the everyday help with bathing, dressing and eating that many people eventually need. The 2025 CareScout Cost of Care Survey puts the national median at $80,080 a year for in-home care (44 hours a week), $74,400 for assisted living and $129,575 for a private nursing home room. Without a plan, that cost often comes straight out of retirement savings.
- A gap in health coverage. Military retirees can generally use TRICARE until 65. At 65, TRICARE For Life generally requires you to enroll in Medicare Part B, or you lose TRICARE coverage. If you’re a federal employee, you can generally keep FEHB in retirement only if you were enrolled for the five years immediately before retiring, or since you were first eligible. Know exactly what covers you, before and after Medicare.
Mark and Denise: Mark elected full SBP coverage on his full retired pay. It costs $195 a month while he’s living. Years from now, after Denise reaches her full retirement age, if Mark dies first, his $3,000 retired pay stops, SBP pays Denise $1,650 for life, and she keeps the larger Social Security check ($2,000) but loses her own ($1,000). Her Primary income falls from $6,000 to $3,650 a month. If her essential bills drop to $5,000, she’s about $1,350 short every month.
Without SBP, her Primary income would be just $2,000, and the monthly gap would be $3,000. That’s why SBP is a decision, not a default, and why life insurance, savings and survivor income have to be planned together.
The Emergency layer isn’t only about protecting the people you love. It’s also about not waiting too long to live.
Five retirement planning checks only veterans have to make
These are easy to miss and, in several cases, hard to undo:
- Review your Survivor Benefit Plan election before you retire. Declining or reducing spouse coverage generally requires your spouse’s written consent. There’s a limited window to drop it later, but you generally can’t add it back.
- Know how your VA disability compensation fits your plan. It’s generally tax-free. If you’re a military retiree with a VA rating of 50% or more, you may be able to receive both retired pay and VA compensation in full through Concurrent Retirement and Disability Pay (CRDP).
- Plan for TRICARE For Life at 65. Enroll in Medicare Part B when you’re eligible, and budget for the Part B premium.
- Federal employee? Ask about a military service deposit. Paying a deposit for your active-duty service can let those years count toward your FERS pension. It generally has to be paid in full before you retire, and interest may apply after your first two years of civilian service.
- Recently separated? Watch your VGLI window. SGLI ends after you leave service. You can apply for Veterans’ Group Life Insurance (VGLI) for a limited time after separation, and if you apply within 240 days, you won’t have to answer health questions.
Leadership isn’t the same as money knowledge
Shateka Husser, founder of Shateka Husser Financial Solutions, knows this firsthand. She was born into poverty. When it was time to sign up for college, her mother didn’t have a car to take her, so she rode with a friend and signed herself up at South Carolina State University.
After earning her degree, she served as an Army officer and left as a Captain and a combat veteran. She went on to become a corporate executive, and she holds an MBA. The military built her leadership, discipline and ability to plan. But as she puts it, even at the graduate level, “I didn’t understand how money worked.”
Then she lost her two closest friends to the flu. They had worked hard their whole lives and never really got to live. “You can’t work your whole life and then expire,” she says. That’s the heart of Retire Before You Expire™: a retirement that’s ready for the hard days is the one that lets you enjoy the good ones.
A five-minute PACE check for veterans
Answer these honestly. Any “I’m not sure” is a layer to build.
- My retired pay, VA compensation and Social Security cover my essential bills.
- I know how much I can withdraw from my TSP and other savings each year, and what I’ll owe in taxes.
- I know where my income comes from if the market drops in my first years of withdrawals.
- My spouse knows exactly what they would live on if I died first, including what SBP would pay.
- I know what would pay for long-term care, and what covers my health before and after 65.
Frequently asked questions about retirement planning for veterans
Is the Survivor Benefit Plan worth it?
It depends on your spouse’s other income, your health, your ages and what private coverage would cost. SBP’s strengths are lifetime income for your spouse, cost-of-living adjustments and coverage that doesn’t depend on your health. Life insurance can cost less for some people and pays a lump sum, but it must stay affordable and in force. Many families weigh both, and some combine them. Because the election is hard to change, compare them before you retire.
Can I receive both military retired pay and VA disability compensation?
Generally, VA compensation reduces retired pay dollar for dollar. But retirees with 20 or more years of service and a VA rating of 50% or higher may receive both in full through Concurrent Retirement and Disability Pay (CRDP). Combat-Related Special Compensation (CRSC) may apply in other cases. DFAS and the VA can confirm what applies to you.
Do I need Medicare Part B if I have TRICARE?
If you’re a military retiree, generally yes. To keep TRICARE coverage once you’re eligible for Medicare at 65, you generally need to enroll in Part B. TRICARE For Life then works as coverage that pays after Medicare.
How much can I withdraw from my TSP in retirement?
Many planners start near 4% of savings in the first year, adjusted for inflation after that. It’s a historical guideline, not a guarantee, and the right amount depends on your other income, taxes, markets and how long your money needs to last.
Retirement is a position, not a date
Good retirement planning for veterans isn’t about one decision. It’s about having a next move ready for every layer, the same way you planned every mission. Retirement isn’t an age. It’s an income, and it should be positioned before you need it, not after.
Your next step
A complimentary 10-minute Wealth Clarity Call is your opportunity to walk through your four layers, including your SBP, TSP and health coverage decisions, and find the one that’s missing before you ever need it.
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This article is for educational purposes only and is not individual investment, tax, legal or insurance advice. Military retired pay, Survivor Benefit Plan, VA compensation, CRDP, TRICARE, FEHB, military service deposit and VGLI rules are set by the Department of Defense, the Department of Veterans Affairs and the Office of Personnel Management, can change and depend on your circumstances; confirm details with DFAS, the VA, TRICARE, OPM or your agency’s HR or benefits office. Shateka Husser Financial Solutions is not affiliated with or endorsed by any government agency. The examples are hypothetical, simplified and do not represent any specific person; actual retired pay, SBP, survivor and Social Security amounts depend on your elections, service record, earnings record and claiming ages. The 4% guideline is based on historical data and is not a guarantee. No strategy eliminates market risk. Cost-of-care figures are national medians from the CareScout 2025 Cost of Care Survey and vary by location. Life insurance is subject to underwriting, and availability, pricing and features vary by insurer, state, age and health. Guarantees depend on the claims-paying ability of the issuing insurance company. Shateka Husser Financial Solutions offers insurance and annuity products; this article is not a recommendation to buy or sell any product.
