Veteran Retirement Income Systems Map - VUB Financial Readiness Course

1Start With the Systems

Payment Systems: Who Sends the Money?

DFAS: military retired pay, CRDP, CRSC processing, 1099-R
VA: disability compensation, pension, Aid & Attendance decisions
SSA: Social Security retirement, SSA-1099, voluntary withholding
TSP/IRA custodian: withdrawals, RMD notices, tax withholding

Measurement Systems: Who Reacts to Income?

IRS: AGI, taxable Social Security, RMD excise tax
Medicare/SSA: IRMAA premiums based on MAGI from two years prior
State tax agency: state-specific rules for pension and retirement income
Lenders/servicers: debt-to-income and monthly payment pressure

2Income Source Reference

Income Source	Typical Form / Payer	Federal Tax Treatment	Classroom Question
Military retired pay	DFAS Form 1099-R	Generally ordinary income	Is withholding set correctly?
VA disability compensation	VA payment; not taxable income	Tax-free federal and state income	Does it cover fixed expenses?
CRDP	DFAS; automatic if eligible	Taxed like retired pay	Is this restored retired pay?
CRSC	DFAS; branch application required	Non-taxable compensation	Is the disability combat-related?
Social Security	SSA-1099	0% to 85% may be taxable	What is combined income?
Traditional TSP / IRA	1099-R from plan/custodian	Ordinary income when withdrawn	Can timing or amount be controlled?
Roth TSP / Roth IRA	1099-R if distributed	Qualified withdrawals tax-free	Are age and five-year rules met?

3The Traditional Withdrawal Domino Effect

1. Withdrawal Traditional TSP/IRA money comes out.

2. AGI Rises More ordinary income on the tax return.

3. Social Security Combined income may tax more benefits.

4. Medicare MAGI can affect IRMAA two years later.

5. State Taxes Rules vary by state and income type.

Contrast: VA disability compensation and CRSC are tax-free sources. They still matter for the household budget and may matter for some means-tested applications, but they do not behave like a traditional TSP withdrawal on a federal tax return.

4Year-End Control Checklist

Review DFAS, pension, and TSP/IRA tax withholding.
Estimate whether Social Security benefits will be taxable.
Complete RMDs before December 31 unless this is a first-RMD year.
Check whether two RMDs would land in one tax year.
Compare Roth source, traditional source, and cash reserve options.
Review whether a large withdrawal could trigger Medicare IRMAA later.
Use QCDs from IRAs when age 70 1/2+ and charitably inclined.
Pay down high-interest debt before taking avoidable taxable withdrawals.

5Table Activity: Build a Control Panel

Income / Decision

Taxable?

Can Timing Change?

Action Before Dec. 31

Military retired pay

VA disability compensation

Social Security

Traditional TSP / IRA withdrawal

Credit card or loan payoff