What happens to my TSP when I leave the military?

Your Thrift Savings Plan (TSP) stays with you. You can leave the money in TSP (which has some of the lowest expense ratios of any retirement plan), roll it into a new employer's 401(k), or roll it into an individual retirement account (IRA). If you take a cash distribution before age 59½, you'll owe income taxes plus a 10% early withdrawal penalty. There's no deadline to decide — your TSP account remains open until you empty it.

Should I elect the Survivor Benefit Plan (SBP)?

SBP provides your surviving spouse 55% of your elected pension base for life. Premiums are 6.5% of your elected base. The decision must be made at retirement and is generally irrevocable after the first year. For many retirees, SBP is the cheapest survivor annuity available because the government subsidizes it. Compare the cost of SBP premiums against the break-even point — the number of years your survivor needs to collect benefits to recoup what you paid in premiums.

Can I use my VA loan benefit after separating?

Yes. VA loan eligibility continues after separation as long as you have a qualifying discharge (generally honorable). You need a Certificate of Eligibility (COE) from the VA. The benefit can be reused — after selling a VA-financed home or paying it off, your entitlement is restored. The VA funding fee is waived entirely for veterans with a service-connected disability rating.

Military Transition — Financial Checklist

Separating or retiring from the military changes your income structure, benefits, insurance, and tax situation all at once. Active duty pay includes tax-free allowances that disappear when you leave. Your healthcare switches from TRICARE to employer plans, the marketplace, or VA care. Decisions about your pension, Thrift Savings Plan (TSP), Survivor Benefit Plan (SBP), and Servicemembers' Group Life Insurance (SGLI) are time-sensitive — some have irrevocable deadlines. Work through this checklist well before your separation date.

Know Your Total Military Compensation

Before you can compare civilian offers, you need to know what you're earning now — not just base pay, but the full picture including tax-free allowances.

Military pay has a hidden advantage

Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS) are tax-free. A service member earning $60,000 in base pay plus $24,000 in BAH/BAS may need a civilian salary of $90,000+ to match the same take-home pay, because the civilian salary is fully taxable.

Try it

Enter your rank, years of service, and duty station in the Military Pay Calculator to see your total compensation and tax-free percentage. Use that number as your baseline when evaluating civilian offers.

Thrift Savings Plan (TSP) Decisions

Your TSP account doesn't disappear when you separate. You have three options:

Leave it in TSP. The TSP's expense ratios are among the lowest available (around 0.04%). If you're happy with the fund options, this is a strong default.
Roll it into a new employer's 401(k). Keeps everything in one place. Check whether the new plan's fees are comparable to TSP.
Roll it into an IRA (Individual Retirement Account). Gives you the widest range of investment options. Keep fees low by choosing a brokerage with index funds.

Myth: "I have to move my TSP when I leave"

There is no deadline to move your TSP. The account stays open and continues to grow. Many veterans keep their TSP for decades because the fees are unbeatable. The only reason to move is if you want investment options not available in TSP.

Marcus's TSP decision

Marcus separates after 8 years with $62,000 in his TSP. His new civilian employer offers a 401(k) with a 0.35% expense ratio and a 4% match. TSP charges 0.04%. The fee difference on $62,000 is about $192/year. Marcus decides to leave his TSP where it is and contribute to the new 401(k) only up to the match — getting the free money without paying higher fees on his existing balance.

Try it

Use the TSP Calculator to project your balance growth, then compare fees with the Fee Impact Calculator to see the long-term cost of moving to a higher-fee plan.

Pension: BRS vs Legacy

If you're retiring (20+ years), your pension system determines your monthly retirement pay:

Legacy (pre-2018): 2.5% × years of service × high-3 average base pay. No TSP match.
Blended Retirement System (BRS): 2.0% × years of service × high-3 average base pay, plus government TSP matching (up to 5% of base pay) and a mid-career continuation pay bonus.

High-3 average

Your pension is calculated from the average of your highest 36 consecutive months of base pay — typically your last three years of service. Promotions and longevity raises in those final years directly increase your pension.

Rivera retires at 20 years under BRS

Rivera's high-3 average is $7,500/month. Under BRS: 2.0% × 20 years × $7,500 = $3,000/month pension. Plus Rivera's TSP with 20 years of matched contributions has grown to $380,000. Under Legacy, the pension would be $3,750/month with no TSP match. The combined value depends on investment returns — but BRS provides both guaranteed income and a portable nest egg.

Try it

Enter your pay and service details in the Military Retirement Calculator to compare BRS and Legacy pension amounts, and see projected TSP income alongside your pension.

Survivor Benefit Plan (SBP)

If you're retiring with a pension, you'll be asked whether to elect the Survivor Benefit Plan. SBP pays your surviving spouse 55% of your elected base for life. Premiums are 6.5% of the elected base, deducted from your pension before taxes.

SBP is an irrevocable decision

You must elect SBP at retirement. Spouse concurrence is required to decline. After the first year, the election is permanent — you can't add SBP later. The government subsidizes SBP, making it cheaper than equivalent commercial annuities for most retirees.

Try it

Use the SBP & SGLI Analyzer to see your monthly premium, the survivor annuity amount, and how many years of benefits it takes to recoup the premiums paid.

SGLI to VGLI Conversion

Servicemembers' Group Life Insurance (SGLI) coverage ends 120 days after separation. You can convert to Veterans' Group Life Insurance (VGLI) without a medical exam within that window, but VGLI premiums increase with age and are often more expensive than comparable term life policies. Shop around before automatically converting.

Myth: "VGLI is always the best deal for veterans"

VGLI's advantage is guaranteed acceptance with no health questions. If you're healthy, a private term life policy will almost certainly be cheaper. Get quotes from multiple insurers before the 120-day SGLI window closes. You can always fall back to VGLI if you can't qualify elsewhere.

Try it

Use the Insurance Needs Calculator to determine how much coverage your family actually needs, then compare VGLI costs against the SBP & SGLI Analyzer.

VA Home Loan Benefit

Your VA loan eligibility continues after separation (with qualifying discharge). A VA loan requires no down payment and no private mortgage insurance (PMI), saving thousands compared to conventional loans. The VA funding fee can be financed into the loan and is waived entirely for veterans with a service-connected disability rating.

Try it

Enter your loan details in the VA Loan Calculator to compare the total cost with and without the funding fee, and see your monthly payment versus a conventional mortgage with PMI.

Healthcare Transition

Active duty TRICARE coverage ends at separation. Your options depend on your situation:

Retiring (20+ years): TRICARE Retiree coverage continues. TRICARE Prime or Select with retiree premiums.
Separating before 20 years: Transitional health coverage (180 days of TRICARE continuation). After that, employer-sponsored insurance, marketplace plans, or VA healthcare if eligible.
VA healthcare: Available to veterans who meet service and income requirements. Priority based on disability rating and other factors.

Don't go uninsured

The gap between military coverage ending and civilian coverage starting is when medical debt risk is highest. File your VA disability claim before separating — the VA's Benefits Delivery at Discharge (BDD) program lets you file 180–90 days before separation.

Comparing Civilian Offers

When evaluating civilian job offers, remember that your military compensation includes tax-free components. A civilian salary of $80,000 may produce less take-home pay than military compensation of $65,000 base + $20,000 BAH/BAS because the civilian salary is fully taxable.

Jordan evaluates a civilian offer

Jordan (E-7, 12 years) earns $4,500/month base pay + $2,100 BAH + $452 BAS = $7,052/month. The tax-free allowances ($2,552/month) save roughly $7,600/year in federal and state taxes. Jordan's tax-equivalent civilian salary is about $92,000. A civilian offer of $85,000 looks like a raise but is actually a pay cut after taxes.

Try it

Run your numbers through the Military Pay Calculator to get your tax-equivalent salary, then compare civilian offers with the Hourly Income Calculator.

VA Disability Claim

File your VA disability claim before you separate. The Benefits Delivery at Discharge (BDD) program accepts claims 180–90 days before separation and typically results in faster processing. A disability rating of 10% or higher qualifies you for tax-free monthly compensation and may waive the VA loan funding fee, exempt you from property taxes in some states, and provide access to VA healthcare.

CRDP (Concurrent Retirement and Disability Pay)

Retirees with a disability rating of 50% or higher can receive both full military pension and VA disability pay — no dollar-for-dollar offset. Below 50%, pension is reduced by the disability amount (though Combat-Related Special Compensation may restore some of that).

Transition Checklist

Calculate your tax-equivalent civilian salary before comparing offers
Decide on TSP: leave it, roll to 401(k), or roll to IRA — no rush, but compare fees
If retiring: elect or decline SBP at retirement (irrevocable after first year)
Convert SGLI within 120 days or get private term life quotes while still insurable
File VA disability claim via BDD program 180–90 days before separation
Get your VA Certificate of Eligibility (COE) for future home purchases
Plan healthcare coverage for the gap between TRICARE and civilian insurance
Update your budget — BAH/BAS tax-free income goes away as a civilian