Understanding How Changes to Military Retirement and Disability Pay Affect Veterans
Significant changes to military retirement and disability pay are on the horizon, impacting how veterans plan their financial futures. These shifts require careful consideration and proactive planning. Are you prepared to navigate these changes and ensure you receive the benefits you deserve? The future financial security of countless veterans rests on understanding these updates.
Key Takeaways
- The Blended Retirement System (BRS), implemented in 2018, now affects a larger portion of the military population, requiring veterans to understand its impact on their retirement savings and matching contributions.
- Concurrent Receipt, allowing veterans to receive both retirement and disability pay, has expanded, but understanding eligibility criteria and potential offsets is critical for maximizing benefits.
- Veterans who separate from service and seek disability benefits should file their claims as soon as possible, as the effective date of the claim can significantly impact the amount of retroactive pay received.
The Blended Retirement System (BRS): A New Era for Military Retirement
The Blended Retirement System (BRS), which went into effect on January 1, 2018, represents a major shift in how military members plan for retirement. Unlike the legacy retirement system that required 20 years of service to receive any retirement benefits, the BRS incorporates a defined contribution plan (Thrift Savings Plan, or TSP) alongside a reduced defined benefit (pension).
Under the BRS, the government automatically contributes 1% of a service member’s basic pay to their TSP account after 60 days of service. After two years of service, the government matches service member contributions up to 5% of basic pay. This matching contribution is a significant benefit, essentially providing free money for retirement savings. However, here’s what nobody tells you: many service members don’t maximize their TSP contributions, leaving potential retirement savings on the table. We had a client last year who didn’t even know about the matching contributions until we reviewed their financial plan. They missed out on thousands of dollars!
The defined benefit portion of the BRS pays 2.0% of the average of the highest 36 months of basic pay for each year of service. This is lower than the 2.5% under the legacy system. To be eligible for the defined benefit, service members still need to complete at least 20 years of service. Those who separate with less than 20 years of service receive only the funds accumulated in their TSP account (and the government contributions, provided they are fully vested). This shift places greater responsibility on service members to actively manage their retirement savings through the TSP. According to the Department of Defense [website](https://militarypay.defense.gov/Pay/Retirement/), the BRS applies to anyone who entered the military on or after January 1, 2018, and those who opted into the system during 2018. For more information on education benefits, see our guide.
Concurrent Receipt: Receiving Both Retirement and Disability Pay
One of the most significant improvements for veterans in recent years is the expansion of concurrent receipt. This allows eligible veterans to receive both military retirement pay and VA disability compensation without a dollar-for-dollar reduction. Previously, many veterans faced a “VA waiver,” where their retirement pay was reduced by the amount of their disability compensation.
There are several programs related to concurrent receipt, including Concurrent Retirement and Disability Pay (CRDP) and Combat-Related Special Compensation (CRSC). CRDP restores retirement pay that was previously offset due to receiving VA disability payments. According to the Department of Veterans Affairs [website](https://www.va.gov/health-care/eligibility/), to qualify for CRDP, a veteran’s disability rating must be at least 50% and their retirement must be based on years of service. CRSC, on the other hand, is for veterans whose disabilities are directly related to combat.
Navigating these programs can be complex. The eligibility criteria for CRDP and CRSC differ, and the amount of compensation can vary depending on the severity of the disability and its connection to combat. I often advise veterans to seek guidance from a qualified veterans’ benefits attorney or accredited claims agent to ensure they receive the maximum benefits they are entitled to. It’s important to ensure you are getting all your VA benefits.
Disability Claims: Timing is Everything
The timing of filing a disability claim can significantly impact the amount of retroactive pay a veteran receives. The effective date of a disability claim is generally the date the VA receives the claim. If a claim is granted, the VA will pay benefits retroactive to the effective date.
For example, if a veteran separates from service in January 2026 and files a disability claim in February 2026, and the claim is approved, the VA will pay benefits retroactive to February 2026. However, if the veteran waits until December 2026 to file the same claim, the effective date will be December 2026, and the veteran will miss out on several months of potential benefits. This is crucial! File as soon as possible.
There’s a caveat, though. The VA has a one-year rule for filing claims within one year of separation from service. If a claim is filed within one year of separation, the effective date can be the day after separation. This is why it’s crucial to gather all relevant medical records and file a claim as soon as possible after leaving the military. If your claim is denied, consider appealing a denied VA claim.
Understanding Disability Ratings and the VA Claims Process
The VA assigns disability ratings based on the severity of a veteran’s service-connected conditions. These ratings, expressed as percentages, determine the amount of monthly compensation a veteran receives. A higher disability rating translates to a higher monthly payment. The rating criteria are outlined in the VA Schedule for Rating Disabilities (VASRD) [document](https://www.ecfr.gov/current/title-38/chapter-I/part-4).
The VA claims process can be lengthy and complex. It typically involves submitting an application, providing medical evidence, and attending medical examinations. The VA may request additional information or clarification throughout the process. If a claim is denied, a veteran has the right to appeal the decision. The appeals process can involve several levels of review, including submitting additional evidence, requesting a hearing, and appealing to the Board of Veterans’ Appeals. Many veterans find that working with a VA benefits attorney can help them cut through red tape.
The claims process isn’t always straightforward. We ran into this exact issue at my previous firm. A client’s initial claim was denied because the VA claimed there wasn’t sufficient evidence of a service connection. We helped the client gather additional medical records and buddy statements, and successfully appealed the decision, securing the benefits they deserved.
Case Study: Navigating the BRS and Disability Claims
Let’s consider a hypothetical case. Sergeant Major (Ret.) Sarah Jones served in the Army for 22 years and retired in 2026. She entered service in 2004, so she was eligible to opt into the BRS in 2018, which she did.
Sarah’s average high-3 basic pay was $7,000 per month. Under the BRS, her retirement pay is calculated as follows: 2.0% x 22 years x $7,000 = $3,080 per month. She also contributed to her TSP throughout her career, and thanks to diligent saving and the government matching contributions, she accumulated a balance of $250,000.
Upon retirement, Sarah filed a disability claim for several service-connected conditions, including tinnitus and back pain. The VA initially rated her tinnitus at 10% and her back pain at 20%. However, after appealing the decision with the help of a veterans’ advocate, she was able to increase her back pain rating to 40%, bringing her combined disability rating to 50%. This qualified her for CRDP, allowing her to receive both her full retirement pay of $3,080 per month and her disability compensation.
Sarah’s proactive approach to understanding the BRS, maximizing her TSP contributions, and pursuing her disability claim allowed her to secure a comfortable financial future.
Frequently Asked Questions
What is the difference between CRDP and CRSC?
CRDP restores retirement pay that was previously offset due to receiving VA disability payments, while CRSC is for veterans whose disabilities are directly related to combat.
How does the BRS affect my retirement pay if I serve less than 20 years?
If you separate with less than 20 years of service under the BRS, you will not receive the defined benefit (pension), but you will receive the funds accumulated in your TSP account, including any government matching contributions you are vested in.
What is the effective date of a disability claim?
The effective date of a disability claim is generally the date the VA receives the claim. However, if a claim is filed within one year of separation from service, the effective date can be the day after separation.
Where can I find the VA Schedule for Rating Disabilities (VASRD)?
The VASRD is available on the Electronic Code of Federal Regulations [website](https://www.ecfr.gov/current/title-38/chapter-I/part-4).
What should I do if my disability claim is denied?
If your disability claim is denied, you have the right to appeal the decision. The appeals process can involve submitting additional evidence, requesting a hearing, and appealing to the Board of Veterans’ Appeals.
Understanding the changes to military retirement and disability pay is essential for veterans to secure their financial future. These changes can be complex, but by staying informed and seeking professional guidance, veterans can maximize their benefits and achieve financial security. The most important thing you can do now is review your TSP contributions and ensure you’re maximizing the government matching contributions. That’s free money you don’t want to leave on the table. Making sure you have sound finance advice for veterans is key.
