Federal retirement decision guide · Reviewed September 6, 2026
Which federal retirement income is taxable?
Your gross retirement income is not the same as taxable income. A Federal Employees Retirement System (FERS) annuity, traditional Thrift Savings Plan (TSP) withdrawal, and most military retired pay are generally federally taxable; qualifying Department of Veterans Affairs (VA) disability compensation is generally tax-free. Social Security, Roth TSP, and survivor income depend on source and conditions.
This educational page explains the map; it does not calculate your tax return, benefits eligibility, medical premium, or personalized result.
Which income sources are taxable?
The table is a starting classification, not a filing position. The agency named in the final column owns the underlying record or rule; IRS guidance controls federal income-tax treatment.
| Income source | Typical federal treatment | Rule owners | Important condition |
|---|---|---|---|
| FERS annuity | Generally taxable as ordinary income, less any eligible recovery of after-tax employee contributions. | IRS / OPM | Your OPM statement and annuity tax information determine the taxable portion. |
| VA disability compensation | Generally excluded from federal gross income when paid under qualifying VA disability provisions. | VA / IRS | Do not treat a tax-free payment as a deduction from taxable income; it is a separate cash-flow source. |
| Traditional TSP | Distributions are generally taxable as ordinary income; exceptions and basis can change the result. | IRS / TSP | Withholding is not the same as final tax. Early-distribution rules may apply. |
| Roth TSP | Qualified distributions are generally tax-free; a distribution must meet applicable qualification rules. | IRS / TSP | Track qualification, contributions, conversions, and any employer Roth details. |
| Social Security | A portion may be included in federal taxable income when combined income is high enough; the benefit itself is not automatically all taxable. | SSA / IRS | Use current IRS guidance for filing status and combined-income calculations; do not use a flat percentage. |
| Military retired pay | Generally taxable federal income unless a specific exclusion or disability-related rule applies. | DFAS / IRS | Combat-related and other special circumstances require documentation and agency confirmation. |
| Survivor income | Treatment follows the source: survivor annuity, Social Security survivor benefit, VA benefit, or insurance may each have different rules. | IRS / OPM / SSA / VA | Identify the payer and award type before estimating taxability. |
How does Traditional versus Roth TSP change the sequence?
Traditional TSP withdrawals generally add to taxable income in the year distributed. Qualified Roth TSP withdrawals generally do not. That difference can affect withholding, the taxation of Social Security, and income-related Medicare Part B and Part D premiums. A Roth balance is not automatically “better”: qualification, contribution history, conversions, required distributions, and the timing of withdrawals matter.
Use the TSP withdrawal strategy guide for sequencing questions. The public page cannot determine your qualified-distribution status. Veterans combining these sources should also review how VA disability compensation interacts with a FERS pension.
- Gross payment: what the payer sends before deductions.
- Taxable income: the portion included under the applicable rule.
- Net deposit: payment after tax withholding, premiums, and other deductions.
Why can Social Security and IRMAA change the answer?
The Social Security Administration (SSA) reports benefits, while the Internal Revenue Service (IRS) applies a household calculation that considers benefits and other income. Taxable Social Security is not the same as withholding and does not mean the entire benefit is taxable. Medicare Part B and Part D income-related monthly adjustment amounts (IRMAA) are separate premium determinations based on Medicare’s rules and tax-return information.
Thresholds and premiums can change. Avoid copying a year-specific number into a long-range plan unless it is date-labeled and sourced. Start with IRS Publication 915 and Medicare’s IRMAA guidance.
What does state follow-up add?
Federal treatment is only the first pass. Your state of residence may exempt, partially exempt, or tax a FERS pension, military retired pay, TSP distribution, Social Security, or survivor income differently. VA disability compensation generally remains excluded from income, but confirm the benefit type. A state-tax list cannot tell you your federal taxable income or your monthly net deposit.
After identifying federal treatment, use the state follow-up guide and verify the current rule with your state revenue agency or tax professional.
Source-classification worksheet
How do I prepare an after-tax retirement income view?
Do not apply one assumed tax rate to combined retirement income. Instead, build a source ledger first, then use the existing scenario model for year-by-year federal tax, state tax, healthcare, and net-income calculations.
- Identify every payer.List the Office of Personnel Management (OPM), TSP, SSA, VA, Defense Finance and Accounting Service (DFAS), insurers, and survivor-benefit payers separately.
- Record the exact payment type.Distinguish a FERS annuity from its special retirement supplement, Traditional from Roth TSP, and VA disability compensation from other VA benefits.
- Mark treatment as taxable, excluded, conditional, or unknown.Use the payer’s tax form and the official sources below. Do not guess when qualification, basis, disability, or survivor rules are unresolved.
- Keep withholding and deductions separate.Federal withholding, state withholding, Federal Employees Health Benefits (FEHB), Medicare premiums, and IRMAA affect the deposit but do not define taxable income.
- Model the household by year.Use a saved scenario to account for filing status, changing income sources, Social Security inclusion, healthcare costs, and state assumptions.
Who is this for, and what can’t it determine?
This is for federal employees, veterans, military retirees, and surviving households sorting income sources before a planning conversation. It is not for filing a return, selecting a tax election, determining VA eligibility, proving a survivor benefit, or forecasting Medicare premiums.
Confirm your award letters, Forms 1099-R and SSA-1099, TSP distribution records, DFAS statements, and current agency guidance. If a source is unknown, leave it unknown rather than assigning it a tax rate.
Next step
Turn the map into a year-by-year view
Once you have a saved scenario, open My Plan and choose Lifetime Income. The existing model can connect FERS, VA compensation, Social Security, TSP, taxes, and healthcare assumptions; it is not a substitute for an official tax calculation.
Open My PlanPrimary sources and provenance
Last reviewed September 6, 2026. Official agencies control changing rules.