Veterans Affairs (VA) disability compensation is intended to pay veterans for service-connected illness or injury that reduces their earning capacity. Issues regarding how these benefits interact with other retirement income sources and whether adjustments are made tend to arise as veterans near retirement age.
Current structure of VA disability benefits
VA disability pay is a non-taxable cash allowance paid to veterans for illness or injury incurred while on active duty in the military. They are awarded as per a rate table of impairment based on the severity of the condition and to what extent it would impact the earning capacity of the veteran. Most notably, the advantage is not a matter of income; vets receive disability pay both on and off the job, as well as for the amount. Most notably, when vets are age 67, Social Security full retirement age after birth year 1959, VA disability pay is paid at the same level. Unlike civilian pensions or Social Security benefits, this is unique, which typically pays out only a portion of earnings prior to retirement.
The 55-year-old rule and sheltered ratings
The VA has created some shelter for disability ratings on older veterans.
One of them is the “55-year-old rule.” Under this rule, veterans aged 55 and above are reasonably protected from follow-up periodic exams that can reduce their disability ratings. The rule takes into consideration that some disabilities only worsen with age and provides veterans with continuity in benefits. Exceptions are those in which there is clear evidence of improvement in health status or cases with such a disease as cancer, which require regular re-exams regardless of age.
Individual unemployability benefits and retirement age
Total Disability Due to Individual Unemployability (TDIU) allows for the payment at the 100% rate of disability for veterans who cannot obtain substantially gainful employment due to service-connected disabilities, even though they do not have a 100% combined rating.
To the current date, TDIU benefits continue beyond retirement age.
Policy reasons have, however, proposed ending this practice. One of the proposals would end TDIU pay for veterans at full Social Security retirement age on the basis that by that time, individuals are typically retired from employment. Under this proposal, veterans would need to go back to receiving payment solely on their schedular rating for disability when they were 67 years old, thereby reducing their compensation every month.
Proposed disability benefit cuts at age 67
Another option being considered is reducing VA disability compensation 30% for veterans at age 67. The thought is that disability compensation is designed to replace lost income because of service-connected disability. Since the majority of incomes decline after retirement age, the thought is that disability compensation should be reduced as well.
It should be noted that this proposal would have its impact only on those veterans who begin receiving disability compensation in 2026 or later; current recipients would be excluded.
Effect of suggested amendment on veterans
The suggested amendment in VA disability compensation at the age of retirement has welcomed the veteran community with lukewarm reception. Those in support of it feel that confining disability compensation to retirement status is in accordance with the initial purpose of the benefits—compensation for lost earning capacity while on active duty.
In their view, once a veteran has retired and is already receiving pension or Social Security benefits, there is no longer a necessity to pay further compensation. Opponents are worried about the fiscal well-being of elderly veterans. They argue that the disabilities which lead to disability during service have long-term health expenses and quality of life losses, and such expenses will endure even after they are no longer working. Reducing the benefit at retirement time will be a hardship on such veterans who take this benefit to cover their health problems and spoil themselves with an affordable quality of life.
Cost-of-living adjustments and future benefits
Other than structural adjustment, cost-of-living adjustments (COLAs) are also a significant component of VA disability benefits annually. They seek to keep the benefits in line with inflation. For instance, a 2023 federal regulation mandates that the VA provide the same COLA as the Social Security Administration (SSA). In 2025, this translated into a 2.5% increase in VA disability benefits that went into effect on December 1, 2024.
Navigating the future landscape
As controversy surrounding changes to VA disability compensation is constructed, veterans are urged to stay involved and well-informed. Paying attention to veterans’ organizations, obtaining VA-credentialed representatives, and participating within public comment periods can empower veterans to have a voice in policy considerations. Staying aware of probable effects of proposed changes is central to good financial planning and advocacy.
