Military Retirement Checklist: 7 Money Deadlines in the Last 24 Months

"SBP is just a 6.5 percent bill on my pension"

Full SBP on a $2,900 base costs $188.50 a month. Because the premium is subtracted before federal tax, at an assumed 12 percent rate the real cost is about $166 a month, or $1,991 a year. Look at the last row of the table: it shows what the spouse gets.

Take Lyle and Thuy, a hypothetical couple. Lyle retired as a Navy chief at age 41 and now supervises utility line crews, and Thuy runs a small salon. We picture them when Lyle was 39 and 24 months from retirement, pricing full SBP with a projected $2,900 a month pension.

The premium is $2,262 a year. It cuts Lyle's federal tax by $271, so the true cost is $1,991. If Lyle died, Thuy would receive 55 percent of $2,900, which is $1,595 a month, or $19,140 a year for life with cost-of-living increases. It is taxable to her. Add up 16 years of after-tax premiums, from age 41 to age 57, and you get $31,856. Her annuity repays that in under 2 years. The salon has no pension, and that is why SBP carries more weight for this household. Put your own projected pension and tax bracket into these steps to see your numbers.

People say you can decline SBP. The actual rule is narrower. Declining or reducing spouse coverage needs the spouse's written, notarized concurrence on DD Form 2656, and otherwise full coverage applies by default. Keep the signed DD 2656 and the first retiree account statement that shows the premium deduction.

The trade-off is plain. You gain a lifetime, inflation-adjusted income for your spouse. You give up about $2,000 a year after tax until the coverage is paid up, after 360 payments and age 70. SBP compared with life insurance has its own page on this site.

What the SBP rule says

What you gain and give up

"My TSP closes the day terminal leave starts"

Terminal leave keeps you on active duty and in pay status. TSP deferrals keep coming out of each paycheck until the final military paycheck, and after that no new employee contributions can go in. The last pay periods are your final chance to raise or lower the percentage in myPay.

For a High-3 retiree there is no matching contribution, so each extra deferred dollar is tax deferral only. It shifts tax to your income draw years and does not erase it. That can still be a good trade if your bracket will be lower later, but with a civilian salary stacked on a pension, it often won't be.

Lyle retired at age 41, so the age 50 catch-up of $8,000 never applied to him. A member retiring at age 50 or older should check that the catch-up election is active on the final LES (leave and earnings statement). The IRS limit for 2026 is $24,500 in employee deferrals, and the catch-up goes on top.

Screenshot the myPay TSP election page and keep the final LES that shows the last deferral. Those 2 documents settle any later question about what went in.

"Selling back leave is tax-free money"

Leave sellback is capped at 60 days over a career, with narrow exceptions. The lump sum is taxed as ordinary wages unless the leave was earned in a combat zone, so 30 days at about $200 a day adds $6,000 of taxable income to the year it is paid. If a private-sector job offer is already in hand, terminal leave usually puts more money into the household that year, because military pay and civilian pay overlap.

"DFAS will withhold the right tax on retired pay"

DFAS withholds federal tax on retired pay based only on the election you file in myPay. It does not see Lyle's salary as a line crew supervisor or Thuy's salon profit. Each payer withholds as if its own income were the household's only income, so the total falls short.

Which income counts? The pension and the civilian salary are taxable. Thuy's salon profit also owes self-employment tax and usually needs quarterly estimated payments. VA disability compensation, if there is any, is not taxed and is not counted at all.

One threshold is easy to reach. Once a $34,800 pension, a supervisor's salary and salon profit add up past $242,000 of modified AGI for a married couple, direct Roth IRA contributions begin phasing out, and they are gone at $252,000 (2026 IRS figures).

Keeping the active-duty withholding election on retired pay catches careful people who did file the form. DFAS withholds on a $34,800 pension as if it were the household's only income, at roughly 10 to 12 percent, while the stacked household income taxes it at an assumed 22 percent. That gap is about $3,480 owed in April, plus a possible underpayment penalty.

Income first, in practice: before Edgepoint Wealth Management talks about any fund, it adds the pension, both earned incomes and the SBP deduction into one projected tax line. Only then does it set the withholding on retired pay.

Which income counts

The withholding gap

How long do you have to pick TRICARE after retirement day?

From your retirement date, the clock gives you 90 days to sign up for TRICARE Prime or TRICARE Select. Miss it, and coverage stops until the next open season or a qualifying life event. Retiree enrollment fees change each year, so check the current amount. File the enrollment confirmation letter with your DD 214.

24 months out: the money steps in order

Month 24 comes first. You pull 3 years of LES to check the High-3 average and request a retired pay estimate. At month 18, you and your spouse rough out the first-year household tax with the pension and the new salary stacked together. Run the Blended Retirement System versus High-3 gap here too if it applies to you.

At month 12 you attend SBP counseling at the transition office and draft DD Form 2656 together with your spouse. At month 6 your commander approves terminal leave or a sellback in writing, and you keep the approved leave form. If a civilian job offer is in hand before your retirement date, use leave as terminal leave and skip the sellback: military pay keeps flowing while civilian pay starts, and TSP deferrals continue on the military pay until the final paycheck.

At month 3 you update Form TSP-3 so the beneficiary matches the will, because the TSP follows the form and ignores the will. Keep the TSP confirmation. On retirement day you collect the final LES, the DD 214 and the filed DD 2656.

Within 90 days you enroll in TRICARE, then set withholding on retired pay in myPay to match the stacked household income. This checklist covers money deadlines only. Each service runs its own retirement processing, so the transition office's written instructions decide the exact dates. A household weighing SBP against life insurance needs that comparison worked out separately before anyone signs DD 2656.

Months 24 to 12

Months 6 to retirement day

Your DD 2656 and final LES on Edgepoint Wealth Management's desk

Edgepoint Wealth Management would read the draft DD 2656 and the final LES first, because together they set the after-tax pension and the spouse's income. Next it would estimate the household's tax with the civilian salary added and compare that figure with the withholding currently on file. Fund choices come after that number exists.