Financial Planning for Military Retirement: Protect and Grow TSP Savings

Imagine if, in just a few years, the financial planning for military retirement you’ve worked so hard for during years of active-duty service isn’t enough to cover your retirement expenses. That’s the reality many military retirees may face in civilian life.

Military retirement pay rarely produces enough cash flow without supplemental benefits like disability pay or investments such as a traditional Thrift Savings Plan (TSP). Let’s explore the potential shortfall and what you can do to prepare.

Military Retirement for Veterans: A New Perspective

Veterans, don’t undervalue your resources! Understanding how to position your assets to work for you improves your post-military outcomes.

Whether it’s a military pension, disability pay, savings, or even your knowledge and skillset, these assets can provide significant value when managed effectively.

Assets to Manage:

• Military Pension: A steady income but often insufficient by itself.
• VA Disability Pay: Tax-free income for those eligible.
• Savings Accounts: These include TSP, IRAs, and other investments.
• Knowledge & Skills: These can be leveraged to create additional income streams or opportunities.

Is Your Retirement Pay a Priority?

What’s your top priority in life today? Where does retirement sit on that list? If you’re younger, like many active-duty service members excited about increases in base pay, retirement planning might be low on your agenda.

Key Questions to Ask:

1. How much do I want to live on during retirement?
2. Are my current savings and investments sufficient to cover that?
3. What additional steps can I take now to prepare?

If you’re older and nearing retirement, planning becomes much more urgent. By this stage, you’ve likely built up your TSP account and other assets.

With increasing market volatility, protecting what you’ve earned is crucial. Unlike younger service members, you’ll soon need to rely on these resources.

Your Financial Situation

Older military retirees face unique challenges. Many built their wealth before the Internet age and without the benefits of the new blended retirement system. Social Security may provide little support, making personal savings critical.

Financial Realities for Military Retirees:

• Blended Retirement System: Not available for older retirees, limiting benefits.
• Social Security: Not sufficient to replace lost income.
• Increased Longevity: Longer lifespans mean more years to fund in retirement.

The good news? You can protect your retirement savings and avoid unnecessary risks. You can preserve and even grow your nest egg by focusing on strategies to shield your investments from market downturns and taxes.

Variables That Impact Your Retirement Pay and TSP

As you leave military/federal service or reach age 59. 5 while still active, you can roll over your TSP to an individual retirement account (IRA) without penalty or tax consequences. This gives you an opportunity to take more control over these dollars and avoid common risks. Additionally, rolling over your TSP to an IRA may allow you to explore annuities for military retirees, providing a steady stream of income in retirement.

Common Risks to Retirement Savings:

1. Market Crashes: A sudden downturn can significantly impact your nest egg.
2. Taxes: Rising taxes (expected in 2026) could erode your savings.
3. Inflation: Reduces purchasing power over time.

The Future of Taxes and Military Retirement Pay

Currently, taxes are at historic lows, but they are expected to increase in 2026 when the Trump tax cuts expire. This presents a risk, particularly for those with tax-deferred accounts like the TSP or a 401(k).

Tax-Deferred Accounts:

• Thrift Savings Plan (TSP): Taxable upon withdrawal.
• 401(k): Similar tax treatment to TSP.
• IRAs: Depending on type, could face future tax burdens.

Active-duty military members enjoy tax advantages, but these benefits often diminish upon retirement. Tax planning becomes essential as you begin relying on military retirement pay and TSP income.

Retirement Income Insurance Protects Your Savings

Traditional financial planning often emphasizes maximizing contributions to TSPs and IRAs. While important, this approach exposes your savings to both market risk and tax liabilities.

Why Consider Fixed Index Annuities (FIAs)?

• Market Protection: Shield your principal during downturns.
• Growth Opportunity: Benefit from a percentage of market gains.
• Predictability: Avoid unexpected losses and secure a steady income stream.

Insure Things With Value

Consider the financial losses many experienced during the most recent stock market crash. Why not insure yourself against similar losses in the future? Unlike accidents or disasters, market crashes are inevitable. The question is: Will you be ready?

From Retirement Uncertainty to Private Pension Plans

With US VetWealth’s War Chest strategy, you can roll over your TSP and IRAs into a plan that locks in your profits. Using FIAs to create a private pension from your TSP or other retirement savings, you can guarantee that your assets are protected from future losses while still participating in market growth.

Benefits of the War Chest Strategy:

1. Protects against market losses.
2. Ensures a steady income stream.
3. Provides flexibility for changing financial needs.

How Does Life Insurance Factor In?

Traditional options like Veterans Group Life Insurance or the Survivor Benefit Plan often don’t provide enough coverage to fully replace retired pay. Leveraging life insurance as part of your strategy can help protect your TSP and retirement savings.

Full Retirement Age for Military Retirees

Saving, growing, and protecting your money isn’t just about contributions to a Roth TSP or IRA. As you get older, planning to use your savings as income is essential without taking risks. People are living longer, and healthcare costs are increasing. It is challenging to have a plan you can’t outlive while keeping pace with inflation.  

Retirement Income Checklist:

• Evaluate current savings and investments.
• Assess market risks and tax implications.
• Explore options like FIAs for additional protection.
• Speak with a US VetWealth consultant to learn more.

A New Way to Guarantee Your Military Pension, Base Pay, and TSP

At US VetWealth, we focus on maximizing the return on your investments while ensuring you can use your wealth meaningfully during your lifetime. Modern strategies offer flexibility, allowing you to access and grow your wealth simultaneously rather than solely passing it on to heirs.

Learn About the Private Pension: 7-Figure TSP to FIA Rollover Blueprint.

You’ve worked hard to save for retirement and want to protect those savings while still participating in market growth. A private pension offers a solution that guarantees your principal while allowing you to benefit from market upswings without the risk of losses.

Schedule a free military retirement income consultation today. Our experts will help you create a plan to protect your Thrift Savings Plan or avoid the costs of SBP.