Edgepoint Wealth Management and tax planning for veterans with a pension and a second paycheck

Tax planning for veterans at Edgepoint Wealth Management covers 4 income streams

Four streams usually feed your return. Taxable retired pay arrives on Form 1099-R from DFAS. VA disability compensation is tax-free and never appears on Form 1040. Second-career wages come on a W-2. Traditional TSP and 403(b) income draws are fully taxable, while Roth draws that meet the IRS rules are not.

The veteran who needs this most has a pension and a civilian salary landing in the same years, or is within 3 years of a last paycheck. A widowed retiree who now files single needs it too. The standard deduction drops to $16,100 and the brackets narrow, so the same income costs more tax.

Edgepoint Wealth Management works income-first. We begin with the monthly draws you'll live on and estimate the tax on them. Only then do we pick which account pays. Before we suggest any move, we label it either "saves tax" or "only moves tax to a later year."

How long does a tax map hold before it gets reopened?

A tax map holds for one year, because Edgepoint Wealth Management reviews the playbook every fall, while there is still time to change payroll deferrals before December 31. Some events force an extra review sooner: a change in VA rating, your last civilian paycheck, the first Social Security check, a move to another state (some states tax retirement pay, so check your state's rules), a change in filing status, or turning age 63, since that year's MAGI sets your Medicare premium at age 65.

2 earlier decisions feed the tax numbers: the retirement playbook and the TSP rollover

Military retirement planning sets the monthly income target and the Survivor Benefit Plan election, and both change your taxable income. TSP rollover decisions decide where future income draws come from. Before any rollover is suggested, Edgepoint Wealth Management estimates how it changes the tax on those draws, because Roth balances and traditional balances are taxed differently whichever account holds them. Those two topics have their own pages; here they only supply the inputs.

How much does a $35,750 catch-up at age 63 really save?

A $35,750 catch-up at age 63 saves a hypothetical retiree named Faye $3,575 in net tax if she later draws the money at 12 percent after deferring it at 22 percent. A pre-tax deferral saves money only if the dollars come out at a lower rate than they go in. When the rates match, the tax just moves to a later year.

Faye (hypothetical) is 63, widowed, and retired from the Army as a warrant officer, with a VA disability rating. She earns $90,000 in her last full year as a school district logistics manager and receives $42,000 of taxable Army retired pay. Her VA compensation stays off the return. She plans to stop work at age 64 with $650,000 split between the TSP and a 403(b).

Her wages are under $150,000, so she can defer $24,500 plus the $11,250 age 60-63 catch-up pre-tax, a total of $35,750. Assuming those dollars would be taxed at 22 percent now, she cuts this year's bill by $7,865 ($35,750 × 0.22). If she draws them at ages 64 to 66 at 12 percent, she pays $4,290 later, so the real saving is $3,575. Her age-63 MAGI also drops from $132,000 to $96,250. If her later rate were also 22 percent, she would save $0, because the tax would only move.

The net saving grows with the amount deferred, but the Medicare effect jumps once age-63 MAGI falls under $109,000 (single, 2026 tiers). At that point $24,500 and $35,750 both reach the $202.90 standard Part B premium instead of $284.10, which is $974.40 a year.

One exception matters. If prior-year FICA wages from that employer topped $150,000, the IRS rule makes the catch-up go to Roth, and this pre-tax math doesn't apply. The deferred money also remains invested in the 403(b). No fund is guaranteed, and a market drop can leave the balance lower for several years.

And deferring more pre-tax isn't always better. If your pension alone already fills a middle bracket, and RMDs at age 75 will push your traditional balances out at a higher rate, a Roth catch-up can come out ahead even when pre-tax is allowed. The savings in any example also depend on tax law staying the same, and nobody can promise that.

The rule that decides pre-tax or Roth

A payroll slip that costs $715

What age turns each tax rule on?

Age 50 opens the $8,000 catch-up, and ages 60 to 63 replace it with the higher $11,250 catch-up, using the IRS 2026 figures. Next come age 65 for Medicare, age 67 for full Social Security retirement age, and age 75 for RMDs, the last two for anyone born in 1960 or later.

Your MAGI at age 63 sets your Part B premium at age 65, and at age 65 you need Medicare Part B to keep TRICARE For Life. Deadlines are plain. 403(b) and TSP deferrals only count if they come out of a paycheck by December 31, and you can't add them after you leave the job. IRA contributions can be made up to the tax-return due date.

Watch the HSA trap if your second-career employer offers one. TRICARE isn't a high-deductible plan, so you can't contribute to an HSA in any month TRICARE covers you. An excess contribution owes a 6 percent excise tax for each year it stays in the account, unless you take it out with its earnings by the return due date, including extensions.

Payroll mistakes are common here. An office that leaves your election at the $8,000 age-50 amount after you turn 60 removes $3,250 of deferral room. At an assumed 22 percent rate, that's $715 of tax you can't defer that year. Compare the year-to-date deferral line on your first pay stub of the year against $35,750, and ask the plan in writing which limit payroll applies.

5 papers that set your starting tax numbers

Start with your DFAS Form 1099-R and the latest retiree account statement. They show taxable retired pay and the federal withholding currently set. Withholding chosen while you were married often runs short once you file single.

Add the VA benefit summary letter. It confirms your rating and monthly amount, so Edgepoint Wealth Management can keep that money out of the taxable column and still count it as spendable income.

Bring your 2 most recent Form 1040s plus your latest pay stub. The returns show your actual bracket and MAGI, and the pay stub's year-to-date deferral line shows whether payroll applied the age 60-63 catch-up.

Last, gather TSP and 403(b) statements with the traditional and Roth split, plus your Social Security statement from the SSA. The split decides how much of each future income draw is taxable, and the statement gives benefit estimates at ages 62, 67 and 70. Missing one paper won't stop the first conversation. We'll say which numbers are estimates until it turns up.