The days of BAH and BAS sure were sweet. But they are long gone at retirement. Service members who spent 20-some years getting paychecks with tax-free allowances may be disappointed at what they find in their first retirement check. It turns out a military pension is fully taxable federal income, and depending on where you live, the state is taking its share too.

That said, it behooves those close to retirement to plan for these taxes in their separation budgets, because taxes can cost military retirees thousands of dollars every year, which could be an absolute disaster if they don’t plan for them.