You did 20 years. You earned your retirement pay. Now you have a civilian job lined up. You know the base retirement number. You know the job offer salary. But when you add them together, the number that hits your bank account looks wrong.

Where did all that money go? Federal taxes, state taxes, TRICARE decisions, SBP premiums, TSP contributions, and 401(k) matches all take a bite. Some of those bites are worth it. Some are not. And if you have VA disability pay in the mix, part of your income is tax-free. That changes the math again.

I went through this myself after separating from the Navy. I had retirement estimates, a job offer, and zero clue what my actual take-home would be. I built a spreadsheet, got it wrong twice, and finally figured it out the hard way. This guide walks you through the same math so you can skip the guessing.

What Does Military Retirement Pay Look Like in 2026?

Your retirement pay depends on which system you fall under. There are three retirement systems, and they calculate differently.

High-3 system: This covers anyone who joined before January 1, 2018. Take the average of your highest 36 months of base pay. Multiply by 2.5% for each year of service. At 20 years, that equals 50% of your high-3 average.

BRS (Blended Retirement System): This covers anyone who joined on or after January 1, 2018. Same high-3 calculation, but the multiplier is 2.0% per year. At 20 years, that equals 40% of your high-3 average. The tradeoff is the government match on your TSP contributions.

Legacy/Final Pay: This only applies to those who joined before September 8, 1980. It uses final base pay at retirement, not a 36-month average.

Here are two common retirement pay examples for 2026 using the High-3 system:

• E-7 with 20 years: High-3 average base pay around $5,200/month. Retirement pay is roughly $2,600/month or $31,200/year before taxes.
• O-5 with 20 years: High-3 average base pay around $10,800/month. Retirement pay is roughly $5,400/month or $64,800/year before taxes.

These are gross numbers. What you actually keep depends on everything below.

How Do Federal Taxes Hit Your Combined Income?

Military retirement pay is taxable income at the federal level. So is your civilian salary. They stack together and push you into higher tax brackets.

This is where many retirees get surprised. Your retirement pay alone might keep you in the 12% bracket. But add a $60,000 civilian salary on top, and suddenly part of your income is taxed at 22%. Add an $90,000 salary and you are pushing into 24% territory.

Here is how the 2026 federal tax brackets work for a single filer:

• 10%: First $11,925 of taxable income
• 12%: $11,926 to $48,475
• 22%: $48,476 to $103,350
• 24%: $103,351 to $197,300
• 32%: $197,301 to $250,525

For married filing jointly, those brackets are roughly doubled. That matters because many military retirees file jointly with a spouse who may also work.

The standard deduction for 2026 is $15,000 for single filers and $30,000 for married filing jointly. Subtract that from your total income before applying brackets.

So an E-7 retiree earning $31,200 in retirement pay plus $60,000 civilian salary has $91,200 gross income. After the standard deduction of $15,000, taxable income is $76,200. Federal tax on that is about $10,400 for a single filer.

That is roughly $867/month gone to federal taxes alone. And we have not touched state taxes yet.

Dominic Landed a Six-Figure Role
With a Top Defense Firm.

"The most effective resource I used in my transition."
— Dominic, E-7, Marines

Federal (USAJOBS) & private sector formats Translates military jargon into civilian language Tailored to each job — not a generic template

Get My Free Resume

2 free tailored resumes, cover letters & LinkedIn optimization

Does Your State Tax Military Retirement Pay?

This is the biggest variable in your take-home calculation. Some states tax every dollar of your retirement pay. Others exempt it completely. And some fall in between with partial exemptions.

As of 2026, these states have zero state income tax on any income, including military retirement:

• Alaska: No state income tax
• Florida: No state income tax
• Nevada: No state income tax
• South Dakota: No state income tax
• Tennessee: No state income tax
• Texas: No state income tax
• Washington: No state income tax
• Wyoming: No state income tax

Beyond those, many states specifically exempt military retirement pay even though they tax other income. States like Alabama, Arkansas, Connecticut, Hawaii, Illinois, Iowa, Kansas, Louisiana, Mississippi, Missouri, New York, Ohio, and West Virginia all offer full or partial military retirement exemptions.

But here is the catch. Your civilian salary is still taxed by most states. So even in a state that exempts military retirement, your civilian paycheck still takes a state tax hit.

I wrote a full breakdown of states that do not tax military retirement pay in 2026. Check that guide for your specific state. The difference between living in Texas versus California can mean $3,000 to $6,000 per year in your pocket.

For our calculator purposes, here is how it works:

• No income tax state: State tax on retirement pay = $0. State tax on civilian salary = $0.
• Full military retirement exemption state: State tax on retirement pay = $0. State tax on civilian salary = your state rate times your salary.
• No exemption state: State tax on both retirement pay and civilian salary at your state rate.

A retiree in Virginia earning $91,200 combined might pay $4,000+ in state income tax. The same retiree in Florida pays $0. That is a $333/month difference.

TRICARE vs Employer Health Insurance: The Hidden Math

As a military retiree, you have access to TRICARE. This is one of the biggest financial advantages you carry into civilian life. But many retirees do not realize how much money this actually saves compared to employer health plans.

Here are the 2026 TRICARE costs for retirees:

• TRICARE Prime (retiree): Annual enrollment fee of about $700/year for individual, $1,400/year for family
• TRICARE Select (retiree): Annual enrollment fee of about $600/year for individual, $1,200/year for family
• TRICARE For Life: No premium if you have Medicare Part B (for retirees age 65+)

Now compare that to a typical employer health plan. According to KFF, the average employee contribution for employer-sponsored health insurance in 2025 was $1,368/year for individual coverage and $6,296/year for family coverage. And that is only the employee share. Out-of-pocket costs add more.

That is a $5,000+ per year difference for family coverage. If your employer offers health insurance, you probably do not need it. Stick with TRICARE and pocket the savings. That is $425/month you keep.

One exception: dental. TRICARE dental coverage for retirees (FEDVIP) has premiums. Compare those to your employer dental plan. Sometimes the employer plan is cheaper for dental specifically.

What About TSP, 401(k), and SBP Costs?

Three more deductions eat into your take-home pay. All three are optional, but all three matter for your long-term finances.

TSP (Thrift Savings Plan)

If you are still contributing to TSP after retirement, those contributions come from your retirement pay before taxes. The 2026 contribution limit is $23,500 per year. Many retirees keep TSP contributions going because the fees are so low (around 0.04%).

But here is what to think about. If your new employer offers a 401(k) with a match, you might want to shift contributions there. A 5% employer match on a $60,000 salary is $3,000 in free money. That is $3,000 you leave on the table if you put everything into TSP. I wrote a full guide on TSP to 401(k) rollovers for veterans that covers the details.

The smart play for many retirees: contribute enough to the employer 401(k) to max the match. Then put extra savings into TSP if you want to keep growing that account.

Survivor Benefit Plan (SBP)

SBP costs 6.5% of your gross retirement pay. For our E-7 example, that is about $169/month. For the O-5, about $351/month.

SBP provides your spouse 55% of your retirement pay if you die. You elect it at retirement. Once elected, you cannot drop it until you have paid in for 30 years or reach age 70, whichever comes later.

This is a real cost that many retirees forget when calculating take-home pay. If you elected SBP, subtract 6.5% from your gross retirement pay before estimating your net.

Your New Employer 401(k)

If your civilian job offers a 401(k) with matching, your contributions come out of your civilian paycheck pre-tax. Contributing 6% of a $60,000 salary means $3,600/year or $300/month less in your paycheck. But if the employer matches at 50% of 6%, you get $1,800/year in free money.

Add these deductions up. Between SBP, TSP, and 401(k) contributions, a retiree could easily have $500 to $800/month in deductions before any taxes.

How Does VA Disability Change the Equation?

VA disability compensation is tax-free. Federal and state. This is the single biggest advantage in your take-home calculation if you have a rating.

Here are the 2026 monthly VA disability rates for a single veteran with no dependents:

• 10%: $175/month ($2,100/year)
• 30%: $524/month ($6,288/year)
• 50%: $1,075/month ($12,900/year)
• 70%: $1,716/month ($20,592/year)
• 100%: $3,737/month ($44,844/year)

If you have dependents, the rates are higher at 30% and above.

Here is what makes VA disability pay powerful for your take-home math. If you have a 50% VA rating, that $12,900/year is completely tax-free. It does not count toward your federal income tax bracket. It does not count toward state taxes. It just goes straight to your bank account.

There is also CRDP (Concurrent Retirement and Disability Pay). If you have 50% or higher VA disability and are a military retiree, you can receive both full retirement pay and full VA disability pay. At lower ratings (under 50%), your retirement pay is reduced dollar-for-dollar by your VA disability amount through CRSC or other offsets.

For a full breakdown of how retirement pay and civilian salaries interact with taxes, check my military retirement and civilian salary tax tips guide.

Two Real Examples: E-7 and O-5 Take-Home Pay

Time to put all the pieces together. Here are two complete take-home pay examples. Both assume single filer, High-3 retirement system, 20 years of service, living in a no income tax state (Texas), and TRICARE Select for health insurance.

Example 1: E-7 Retiree with $60,000 Civilian Job

That E-7 retiree with a $60K civilian job and 30% VA disability takes home roughly $6,233/month in Texas. The 401(k) contribution reduces the paycheck but builds long-term wealth. Without the 401(k), take-home jumps to about $6,533/month.

Example 2: O-5 Retiree with $90,000 Civilian Job

That O-5 retiree takes home about $10,225/month in Texas with a $90K civilian job and 50% VA disability. Move to a state like California or Virginia, and state taxes could cut that by $500 to $800/month. Check the best states for military retirees in 2026 to see how your state compares.

How to Run Your Own Numbers

You do not need a fancy calculator. You need a scratch pad and 20 minutes. Follow these steps with your real numbers.

If you are going after a federal job as a retiree, there are special rules about dual compensation. Read my guide on federal dual compensation for military retirees before you apply.

Four Moves That Increase Your Take-Home Pay

You cannot control tax brackets. But you can control several factors that affect how much you keep.

1. Pick your state carefully. If you have flexibility on where you live, a no income tax state saves you thousands per year. Even a state with military retirement exemptions helps. Use the veteran tax benefits by state guide to compare options.

2. Keep TRICARE instead of employer insurance. This saves $4,000 to $5,000+ per year for family coverage. Do not sign up for employer health insurance unless the plan is significantly better than TRICARE for your situation.

3. Max the employer 401(k) match. Free money is free money. If your employer matches 50% of your first 6%, contribute at least 6%. That match is an instant 50% return.

4. Target the right civilian salary. If you are underselling your military experience on your resume, you might be leaving $10K to $20K on the table. Use the military to civilian salary guide to figure out what your experience is actually worth. Then build a resume that reflects that value with the BMR resume builder.

What Should You Do With These Numbers?

Run the math before you accept a job offer. Before you choose where to live. Before you make decisions about SBP or 401(k) contributions. Knowing your real take-home pay changes how you evaluate everything.

Many retirees look at their retirement pay plus the civilian salary and think they will be making great money. And they will be. But the gap between gross combined income and actual take-home is bigger than most people expect. Federal taxes alone eat 10% to 18% of your combined income. Add state taxes, SBP, and retirement contributions, and you could be looking at 25% to 35% disappearing before it reaches your bank account.

That is normal. The key is knowing the number so you can plan around it.

If you are still in the transition process, start by getting your resume right. A strong resume leads to a better salary. A better salary changes every number in this calculation. Use the BMR career crosswalk tool to find civilian jobs that match your military experience. Then build a resume that earns the salary your experience deserves.