(This article originally appeared in the September 2026 issue of Military Officer magazine.)

There’s a common, yet not necessarily accurate, notion that once a person retires from the workforce, they will be in a lower tax bracket. Conventional wisdom says that since retirement income is lower than preretirement salary income, income taxes will also be lower.

Yet, many military retirees find the opposite is true. Combine a steady pension with fewer available tax credits and deductions, add in mandatory required minimum distributions that must be taken from retirement accounts each year, and your family might end up paying more taxes, not less, in retirement.

While the civilian population is often in the highest tax brackets during peak earning years, military families experience “a totally different ballgame,” according to Dedrick Curtis, a Certified Financial Planner (CFP), a Chartered Financial Consultant, and an Accredited Financial Counselor.

“Military retirees start with a higher tax floor. They have several stacked income streams — not only do they have a pension that will go up with COLA each year, but they may also have another pension or other retirement savings from a second civilian career,” said Curtis, also the founder of and lead planner at Penny Earned Financial, a fee-only financial planning firm focused on serving the military and veteran community.

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Paul Allen, a Life member of MOAA who founded and owns PIM Tax Services, said his firm sees retirees face a host of tax “surprises” as they transition out of the military and the workforce.

Allen is also a CFP as well as a military qualified financial planner. He noted that military retirees often experience lost deductions and tax credits due to increased income. While they were in the military, a sizable portion of their income, such as Basic Allowance for Housing, was not taxable. And many servicemembers who did not pay state taxes on active duty suddenly encounter them upon retirement.

“When they first separate or retire, I see servicemembers face excise taxes when they accidentally contribute to a Roth IRA [individual retirement account] because they set up their direct deposit years ago and now their modified adjusted gross income is higher than the contribution limit,” Allen said.

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He has also seen retirees forced to pay excise taxes because they make contributions to their IRAs when they don’t have any earned income (a military pension does not count as earned income).

In addition, retirees might miss out on certain tax breaks simply because they don’t know about them. Allen said retirees often neglect to take the subtraction for military retiree income on a state return (in states where this is allowed) because they don’t know about it or how to get it into their tax software.

High earners also face net investment income tax, a 3.8% federal surtax imposed on certain investment income.

But proper advance planning at each life stage can help retirees prepare for future tax situations.

Until Age 60

Some retirees want to pursue a second career in the civilian world. Others want to completely leave the workplace behind after leaving service.

For those who want to leave the working world but still need a stream of income in addition to their military pension, if they are at least 59½ years old, they could start taking withdrawals from their employer-sponsored retirement plan, such as the Thrift Savings Plan (TSP) or a 401(k) plan. Alternatively, if they leave their job or the military during or after the calendar year in which they turn 55, there is an IRS provision called the Rule of 55 that allows penalty-free withdrawals from their employer’s plan.

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Those who have transitioned out of the military but are still working will need to make decisions about how they want to contribute to retirement accounts. If they are concerned about future tax bills, they could consider contributing to either their employer’s Roth 401(k) or a Roth IRA. Notably, there are income limits on the Roth IRA.

Ages 60 to 65

This is an age when many veterans are retiring from a post-military career, possibly with a second pension. It’s a time of life often referred to in personal fi nance literature as the “go-go years” because retirees are their healthiest and most active. Spending is typically highest during this stage.

At the same time, these years might also represent a temporary lull in taxable income since most retirees won’t have started collecting their Social Security benefits. This could be a good time for retirees to consider Roth conversions, which move pretax retirement funds — such as a traditional TSP, 401(k), or IRA — into a Roth IRA. Taxes would need to be paid on the converted amount in the year they are transferred, but future withdrawals would be tax-free.

This year, the TSP began allowing in-plan Roth conversions for those with a vested traditional balance.

“Doing a Roth conversion can be considered a type of ‘tax insurance’ where you agree to pay the tax bill today, and you’re likely locked into that rate, even if the tax rates go up in the future,” said Brian O’Neill, a retired Air Force colonel and fighter pilot who founded the advisory firm Winged Wealth Management and Financial Planning.

Other advantages include the fact that inheritors of Roth accounts don’t have to pay taxes on distributions. Another benefit of this account type is that neither Roth employer sponsored retirement plans nor Roth IRAs mandate required minimum distributions (RMDs).

Age 65-Plus Transitions

Many military retirees don’t realize they age out of TRICARE at midnight on the last day of the month before their 65th birthday. They must then enroll in Medicare parts A and B (or Part C) in order to be eligible for TRICARE for Life (TFL), which acts as a wraparound Medicare supplement and provides prescription drug coverage.

TFL is free, but parts B and C carry a cost, and high earners face a surcharge known as the income-related monthly adjustment amount (IRMAA).

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This is the stage that “really catches people off guard,” Curtis said. Medicare premiums are based on modified adjusted gross income from tax returns filed two years prior. For example, 2026 premiums are based on 2024 taxable income.

Taxpayers in the highest IRMAA bracket pay a whopping $689.90 in 2026 — and that’s per person.

This is also the time frame during which some retirees begin claiming their Social Security benefits. “Most military retirees are taxed on the full 85% — the most allowed by law — of their Social Security,” Curtis said.

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Age 70 and Beyond

Depending on birth year, this is the stage when retirees must start taking distributions from their tax-deferred retirement accounts and these RMDs count as taxable income.

“This is when all the income streams are coming together: pensions, Social Security, and RMDs. And it’s a time when many retirees have less tax flexibility,” Curtis said.

It’s also a time when surviving spouses might face what’s sometimes called the “widow penalty”: They might have close to the same taxable income as when their spouse was alive, but their deductions are effectively cut in half, and they end up paying a higher percentage of taxes than they ever have before.

The good news is that proper financial planning can ease the tax burden.

“If there’s ever a time when you should be meeting with a fee-only advisor, it’s when you retire or are about to retire,” Curtis said. “Not all planners are the same, but I guarantee there’s a fee-only planner out there for you.”