Key Takeaways
- Military education, healthcare, insurance, and housing benefits can significantly reduce lifetime expenses when used correctly.
- Military benefits are unique and complex. Coordinating military and veteran benefits with a comprehensive financial plan can improve financial security during and after service.
- Military pay is more complex than civilian pay and requires careful monitoring and budgeting.
- Understanding your retirement system (Legacy vs. Blended Retirement System) is critical to long-term planning.
- The Thrift Savings Plan (TSP) is one of the most powerful wealth-building tools available to service members.
Financial planning for military service members and veterans is uniquely complex. Frequent relocations, deployments, variable pay, and a benefits system unlike any civilian employer create challenges—and opportunities—that require careful planning. From tax-advantaged allowances and special pays to military retirement, healthcare, and education benefits, the financial decisions service members make can have lasting impacts.
Understanding how these benefits work together is essential to maximizing their value and building long-term financial security. A clear, informed financial plan helps service members avoid missed opportunities, reduce uncertainty, and confidently prepare for life during and after military service.
Understanding Military Pay
Military compensation looks very different from a typical civilian paycheck. While basic pay forms the foundation and is determined by rank and years of service, many service members also receive a combination of special pays and allowances that can significantly affect cash flow and taxes.
Two of the most common allowances are Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS). BAH helps cover housing costs when government quarters are unavailable, while BAS is intended to offset food expenses. Both allowances are generally tax-exempt, which can substantially reduce a service member’s taxable income compared to a civilian earning a similar gross amount.
In addition, many service members receive combat pay, hazard pay, or other special duty pays when assigned to high-risk roles or deployed to combat zones. These pays are designed to compensate for increased risk and are often excluded from federal income tax. Some service members may also receive reenlistment bonuses, which can provide a meaningful financial boost but may come with tax and cash-flow considerations.
Because military pay can change frequently due to promotions, deployments, or duty station changes, it is critical for service members to regularly review their Leave and Earnings Statement (LES). Monitoring the LES helps ensure pay accuracy and prevents missed entitlements. Just as important is building a flexible budget and maintaining an emergency fund, since income levels can rise or fall unexpectedly over the course of a military career.
Military Benefits
Military Retirement System
One of the most valuable long-term benefits of military service is access to a pension, but the structure of that pension depends on when a service member joined the military. In 2018, the Department of Defense introduced the Blended Retirement System (BRS), which significantly changed retirement planning for newer service members.
Those who joined before January 1, 2006, are enrolled in the Legacy (High-3) Retirement System, while those who joined between 2006 and the end of 2017 were given a choice between the legacy system and BRS. Service members who joined after December 31, 2017, are automatically enrolled in BRS.
Under the Legacy system, retirement pay is calculated as 2.5% multiplied by years of service and the average of the highest 36 months of basic pay. The Blended Retirement System reduces the pension multiplier to 2.0% but offsets that reduction by adding government matching contributions to the Thrift Savings Plan. Both systems require at least 20 years of service to receive pension benefits, making long-term career planning especially important.
Thrift Savings Plan (TSP)
The Thrift Savings Plan (TSP) is one of the most powerful wealth-building tools available to military service members. Similar to a civilian 401(k), the TSP allows both pre-tax and Roth contributions and is widely regarded for its extremely low fees and straightforward investment structure.
Service members can contribute up to the annual IRS limit ($23,500 in 2025), with additional catch-up contributions available for those age 50 and older—currently an additional $7,500. Under the Blended Retirement System, the government automatically contributes 1% of basic pay and matches service member contributions up to 5%, making participation especially valuable.
Investment choices within the TSP are intentionally simple. Service members can choose from five core funds that span government securities, bonds, U.S. stocks, and international stocks, or opt for Lifecycle (L) Funds that automatically adjust asset allocation over time. While withdrawals are generally restricted before age 59½, exceptions exist for separation from service after age 55 and certain hardship or IRS-qualified circumstances. TSP loans are also available, though they should be used cautiously as part of a broader financial plan.
Education Benefits
Education benefits are another cornerstone of military financial planning and can dramatically reduce the cost of college, graduate school, or professional training.
The Post-9/11 GI Bill is the most comprehensive education benefit available to eligible service members and veterans. It can cover full tuition and fees at public institutions, provide a monthly housing allowance, and include a stipend for books and supplies. In some cases, these benefits can be transferred to dependents. The Montgomery GI Bill, available in Active Duty and Selected Reserve versions, provides a monthly stipend but is generally less generous than the Post-9/11 GI Bill.
For service members still on active duty, Tuition Assistance (TA) can cover up to 100% of tuition costs for off-duty education, subject to annual and per-credit limits. Credentialing Assistance (CA) further expands opportunities by paying for professional licenses and certifications, and it can often be used alongside Tuition Assistance. Eligibility rules vary by service branch and duty status, so coordination with an education office is essential.
Healthcare
Healthcare is another area where military benefits differ significantly from civilian plans. Active-duty service members receive healthcare through TRICARE, with two primary options. TRICARE Prime functions similarly to an HMO, offering coordinated care with minimal out-of-pocket costs, while TRICARE Select provides greater flexibility in choosing providers, similar to a PPO.
Additional options exist for dependents, including TRICARE Young Adult and separate dental and vision plans. Veterans may qualify for healthcare through the VA healthcare system, with eligibility based on service history, disability status, and income. Care is delivered through VA medical centers and clinics nationwide, though dental and vision coverage may be limited unless service-connected.
Military retirees retain access to TRICARE Prime or Select and may also qualify for TRICARE for Life once enrolled in Medicare, creating an integrated healthcare solution in retirement.
Life Insurance
Life insurance is a critical component of financial planning for military families. Active-duty service members are automatically enrolled in Servicemembers’ Group Life Insurance (SGLI), an affordable term policy, with the option to cover spouses and children through Family SGLI.
After separation, veterans can convert coverage to Veterans’ Group Life Insurance (VGLI), which allows continued term coverage without medical underwriting. Veterans with service-connected disabilities may also qualify for VA Life Insurance (VALife), a guaranteed-acceptance whole life policy. Many service members and veterans also explore private insurance options, particularly when long-term coverage needs exceed government program limits.
Additional Benefits: Disability, Home Loans, and Legal Assistance
Military and veteran benefits extend beyond pay and insurance. VA disability compensation provides monthly, tax-free income to veterans with service-connected disabilities, with benefit amounts determined by disability ratings ranging from 0% to 100%.
The VA home loan program is another powerful benefit, enabling eligible service members and veterans to purchase homes with favorable terms such as no required down payment in most cases, competitive interest rates, limited closing costs, and no private mortgage insurance. This benefit can be used multiple times over a lifetime.
Finally, service members, veterans, and their families often have access to free or low-cost legal assistance, including estate planning, family law guidance, and bankruptcy support. These services are frequently provided through military legal offices, veteran organizations, and pro bono programs.
Conclusion
Military service members and veterans have access to a wide range of powerful financial benefits, each with its own rules and nuances. Understanding how these benefits fit together and how they change throughout your career and into retirement can make a significant difference in your long-term financial success.
Working with a financial advisor who understands military benefits can provide clarity, confidence, and a clear path forward. If you have questions or would like to discuss your personal financial situation, consider reaching out to a Curi Capital advisor for guidance.
Frequently Asked Questions (FAQ)
Do military allowances like BAH and BAS count as taxable income?
Generally, BAH and BAS are not taxable at the federal level, which can significantly reduce a service member’s tax burden.
Should I contribute to the TSP if I plan to leave the military early?
Yes. TSP contributions are always yours, and under BRS, government matching contributions vest after two years of service.
Can I use both Tuition Assistance and the GI Bill at the same time?
In some cases, yes. Rules vary by program and service branch, so coordination with your education office is essential.
Is VA disability compensation affected by other income?
No. VA disability compensation is not means-tested and is not reduced by other sources of income.
Can I use a VA home loan more than once?
Yes. VA home loans are a lifetime benefit and can be used multiple times, provided eligibility requirements are met.
Disclaimers
The opinions and analyses expressed in the article are based on Curi Capital, LLC’s research and professional experience. The information and data in this article do not constitute legal, tax, accounting, investment or other professional advice. Investors should consult with their trusted professionals prior to taking any action.
The opinions and analyses expressed in this newsletter are based on Curi Capital, LLC’s (“Curi Capital”) research and professional experience are expressed as of the date of our mailing of this newsletter. Certain information expressed represents an assessment at a specific point in time and is not intended to be a forecast or guarantee of future results, nor is it intended to speak to any future time periods. Curi makes no warranty or representation, express or implied, nor does Curi accept any liability, with respect to the information and data set forth herein, and Curi specifically disclaims any duty to update any of the information and data contained in this newsletter. The information and data in this newsletter does not constitute legal, tax, accounting, investment or other professional advice. Returns are presented net of fees. An investment cannot be made directly in an index. The index data assumes reinvestment of all income and does not bear fees, taxes, or transaction costs. The investment strategy and types of securities held by the comparison index may be substantially different from the investment strategy and types of securities held by your account.
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