How to use your Veteran Benefits to Help Achieve Financial Independence
Can you, as a veteran, hack military benefits to financial freedom? Yes. The average American household spends $5,000/month. Let’s imagine that this represents you. If you succeed in stacking your benefits as monthly passive income to outweigh $5K/month, then you win in hacking your way to financial freedom.
You can win freedom by increasing money flowing in or reducing the money flowing out. I prefer to focus on income, to think offensively, vs. the defensive approach of aggressive saving and living frugally. Your expenses can shrink to the floor, but your income has no ceiling. And as we say in the military, the defense sets up the offense. The offense remains decisive.
As a veteran, there exist at least four significant sources of passive income that you should hack: retirement, VADC, SSDI, and VR&E. You also have at least two state-level benefits on which to give serious thought: zero property tax, and free college for your dependents.
For illustration, let’s say that you’re an Army Captain (O-3E) retiring at 20 years in 2020. Let’s also say that you fall under the High-3 pension, with two dependent children, and have a good chance at VA 100. And yes, presume $5,000/month in expenses. Sneak peek. That means $3,700/month (pension), $3,300/month (VA 100), $2,800/month (SSDI), and maybe $1,500/month (VR&E housing stipend). That adds up to $11,300/month, best-case scenario.
Veteran Retirement and Pension
Retirement qualifies you for a pension. There exist four pension types: Final Pay, High-3, CSB/REDUX, and BRS. The math goes as follows, monthly pension = (retired base pay) x (multiplier) x (years of service). At present, you can’t choose. It’s a moot issue. You have what you have, and that got determined by when you entered. In our example, the High-3 applies to you. It calculates as follows, $3,700 = (approx. $7,400) x (2.5%) x (20 years).
There exist five types of retirement:
- Regular. Completed 20 years of active service. You can begin active duty as early as age 17 and retire at 37. Some do.
- Reserve. Reservist with 20 years of service who has reached age 60. Sometimes called a non-regular retirement. Ready Reserve recalled to active duty or in response to a national emergency, shall have the age 60 requirement reduced by 3 months for each cumulative period of 90 days (3 months) so performed in any fiscal year after 28 Jan. 2008.
- TERA. Temporary Early Retirement Authority. At least 15, but less than 20 years of active service between 2012 and 2025. Program expected to end 31 Dec. 2025. Future use of TERA will require approval by Congress. Specific eligibility criteria for TERA depends on the service branch. The Army has in place a limited use of TERA, enough to conclude that it’s not an option.
- TDRL. Temporary Disability Retirement List. Temporary disability rating, placed on retirement rolls by member’s branch of service (max of 5 years) before returning to duty, separating, or proceeding onto PDRL. Results from a med board. This results in a military pension. This retirement check comes from the DOD and not the VA.
- PDRL. Permanent Disability Retirement List. Placed on the retirement rolls by member’s branch of service.
All of the above will result in a pension. The math will differ for each. We’ll continue with our High-3 and regular retirement example. But I’m guessing that you’ll want an idea of how to retire as soon as possible, and with the highest return you can get. Keep reading.
Regular, reserve, and TERA allow with reasonable certainty for Concurrent Retirement Disability Pay (CRDP). That means both the pension plus VADC. CRDP requires retirement under the first three, as well as a ≥50% VA disability rating. In our example, that means $3,700/month plus $3,300/month (VA 100), or $7,000/month so far and well over the average in household expenses.
Otherwise, the only way to get both, concurrently, is through Combat-Related Special Compensation (CRSC). The criteria:
- Entitled to or receiving retired military pay
- Rated at least 10% by VA and combat-related
- Have waived VA pay from retired pay (the VA waiver or offset) (it’s a bit complicated)
- Can present documentation for the event resulting in the condition
Notice that CRSC can occur before 15 or 20 years, and pay the pension plus VADC. The math will adjust accordingly. To keep this article from getting too long, I won’t go over it here. Know that less time in service or a lower disability rating means a smaller compensation amount. Also note that yes, with CRSC, you can stack both the pension and VADC, and well before 15 or 20 years. Such a case would most likely look like TDRL/PDRL plus CRSC.
By the way, combat-related need not refer to actual combat. Combat-related may mean training that simulates war, e.g., exercises or field training. It could mean hazardous duty, such as dive, flight, parachute. Or come from an instrumentality, such as combat vehicles or weapons. In 2011, as a Second Lieutenant (O-1E) at Fort Lee, a Private negligently discharged her rifle during a range and almost shot my foot. If she had shot my foot, that would’ve counted as combat-related.
VA Disability Compensation (VADC)
Here’s the big one. A high enough VADC rating can lead to SSDI, VR&E, zero property tax, free college for dependent children, student loan forgiveness, and more. The goal here is not to be disabled but to obtain disability compensation. And winning compensation is probably much easier than you think. There’s no lying or cheating required or encouraged – only diligence. We’ll go over ways to give your claim the best chance possible.
Keep this framework in mind: How much is it? How long will it take? Claims, conditions, criteria, and appeals? Anything quirky? Where can I get help?
How much is it? The amount will depend on the VA’s final composite rating and the number of dependents. The higher the composite and the more dependents, the higher the amount. In our example, a 100% VADC (or VA 100) with two dependent children would pay $3,300/month, non-taxable.
The final or composite score consists of adding up the ratings of each separate disability. Two disabilities, each rated at 50, do not add up to 100. The VA uses a unique table. If you search Google for a VA disability calculator, try punching in 10 different disabilities. With 10 disabilities, you’ll need to score the following individual ratings at the least for VA 100: 70, 40, 40, 10, 10, 10, 10, 10, 10, 10. Notice that using lay math, these individual ratings add to 220. The rule of thumb is to shoot for 250+ points to reach VA 100.
How long will it take? Six months to a year or more. Anecdotal evidence from my friends who’ve reached VA 100 tell me about two years. You can begin your claim at https://www.ebenefits.va.gov/ebenefits/login, six months from separating or retiring, or upon referral to a medical board. Fill out the VA Form 21-526EZ. If you’ve been referred to a medical evaluation board (MEB), your claim will happen as part of the IDES (Integrated Disability Evaluations System) process.
Claims. Two types, standard and a Fully Developed Claim (FDC). File an FDC. The standard claim relies on the VA to obtain your medical information. The FDC lets you take charge. It means more work for you, but you don’t want to leave this up to the VA.
When filing your FDC, look for a form to attach to it called a Disability Benefits Questionnaire (DBQ). DBQ refers to a category of standardized forms for specific disabilities. The VA has created over 70 DBQs, one per disability. For example, if you intend to file a claim for scars or disfigurement, the DBQ for that is Form 21-0960F-1 (scars/disfigurement). Check if the disability you intend to claim already comes with a corresponding DBQ. If not, no worries. Continue mission.
Conditions. Two types, primary and secondary. Primary disabilities refer to those which military service caused or aggravated (made worse). Notice the part about the military having made worse the condition. Even if pre-existing, it suffices VADC that military service has exacerbated it. Primary conditions represent the category that most of us know, and on which we spend most of our efforts trying to win.
There also exist secondary disabilities. Whereas primary refers to a direct service-connected condition, secondary refers to indirect. Secondary connects to primary. These seem easier to win. Whether they are, know that they represent one more way to increase odds of VA 100. Some of the more common reasons connecting secondary to primary include behavioral health, illness, medication side effects, and overcompensation. Also, note that the connecting primary may suffice at a non-compensable rating of 0%.
Yes, 0%. 0% compensation for a primary condition still means service connection, although non-compensable. You may still use it to achieve compensation for a secondary. One more time, realize that a 0% rating on a primary can still service-connect to a 100% rating on a secondary. Makes sense? It doesn’t matter. One more way to stack the odds and the benefits in your favor.
Criteria. For the VA rater to decide, you must connect at least three records:
- What · your present impairment limits your earning capacity
- When · you experienced an illness/injury while serving active duty
- Nexus · that illness/injury caused/aggravated the present impairment (service connection)
Something happened on active duty. That something, or set of somethings, produced or made worse your present medical condition. You indeed have a medical condition that limits your earning capacity. Get straight to the point. Give the rater these records and nothing more. If you lack one of these records or clog his inbox, it makes work difficult for him and unlikely for you to win.
The medical nexus letter will look like a memo for the record (MFR). It should contain four parts:
- Records review. The medical professional writing the letter must state that he has looked at your relevant medical records.
- Medical opinion. The opinion, which must at minimum say, at least as likely as not (the 50% probability evidence standard). Equipoise.
- Medical research. Reason and evidence to support the opinion.
- Credentials. The examiner states his relevant credentials. An eye doctor probably knows more about feet than a VA rater. But when it comes to your foot problem, the VA doesn’t want your eye doctor’s opinion.
For each disability you claim, you should also fill out a VA Form 21-4138 (statement in support of a claim). Tell your story. Say what the condition is. Identify what it resulted from, the symptoms, and the severity of those symptoms. Describe the degree to which it has limited your life.
If the claim requires lay evidence, ask someone relevant to your case to fill out a VA Form 21-4138. When filled out as lay evidence, it now becomes a buddy letter. In his letter, he should state how well he knew you during the qualifying incident, and then what he observed about you.
Along the way, the VA may ask you to undergo a C&P (compensation and pension) exam. It’s a medical review with a VA doctor. It could be a few questions or a comprehensive physical exam. Be honest, of course, but do not be on your best day either. The C&P examiner aims to disqualify you. Furthermore, carry with you the attitude that you gave military life your best effort. If he sniffs you out as lazy or looking to milk the system, he’ll decide accordingly.
Even if he does decide against you, you may still get a second opinion from an approved examiner of your choice. Notice the word equipoise above. Given a 50% probability, such as when the C&P says no, but your doctor says yes, the benefit of the doubt goes to you.
Appeals. Yes, you can appeal. Search for VA Form 20-0998 (your rights to seek further review of our decision). It outlines four review options: supplemental claim, higher-level review (HLR), appeal to the board, and a U.S. District Court complaint. File a supplemental claim given new and relevant evidence. File an HLR when you have no new evidence. These first two, especially HLR, appear to result in more success than the last two and happen much quicker. The last two take years. The VA Form 20-0998 gives instructions on how to file for review. More ways to win. Keep at it.
Quirky things. We’ll discuss SMC (special monthly compensation) another time. Know that there exist four types of VA 100: temporary, schedular, TDIU, and P&T. Temporary means you’re incapacitated or suffering a severe condition. If schedular, you reached about 250 lay points. TDIU pays the equivalent of VA 100 if the member rates at least VA 60 or 70 and cannot obtain substantially gainful employment. Permanent and Total (P&T) provides the least likely chance of reduction later. You want P&T. If you’ve reached VA 100 the other ways, you may write to your local VA Regional Office to request P&T.
Recap. Stack the odds in your favor. Use FDCs and DBQs. File for both primary and secondary disabilities, and claim as many as reasonable. Shoot for 250+ lay points. Add buddy letters. Present the rater with what he needs, and nothing more. Realize TDIU could shortcut to VA 100. And use supplemental claims and HLRs.
Get help. Check out www.VAClaimsInsider.com.
Social Security Disability Insurance (SSDI)
Yes, the SSA computers talk to the VA computers. But eligibility with one doesn’t automatically translate into the other. Check out www.socialsecurity.gov/woundedwarriors.
VADC covers a veteran for loss of earning capacity because of a service-connected medical condition. SSDI compensates the applicant for the loss of the ability to do substantially gainful work because of a medical condition. For SSDI, the condition must have lasted or be expected to last at least a year or to result in death.
How much is it? For our notional Captain (O-3E) with 20 years of work credits, that’s $2,000/month plus $400/month each for two dependent children, or $2,800/month.
How long will it take? Expect about six months to get a response from the SSA, and a mandatory five-month wait if approved. Oh, and the five-month wait comes with no back pay.
Claims, conditions, and criteria. First, you need to meet the non-medical requirements: sufficient work credits, below retirement age, residency, and not working or earning too much. As a veteran, you likely already meet all of those. Then, the SSA asks five questions when evaluating SSDI:
- Do you work too much or make too much money?
- Is your medical condition severe? Will it last at least 12 months?
- Does the condition meet or exceed a listing? A listing is a condition found on the SSA’s Listing of Impairments. It outlines the SSA’s established set of medical conditions determined severe enough to prevent one from performing any gainful activity.
- Can the applicant perform past relevant work?
- Can the applicant retrain for new work?
Income, condition, listing, past work, and retraining. To award SSDI, the applicant must reasonably answer, respectively: no, yes, yes if so, no, no. But the gist of it is that the condition must have lasted or be expected to last at least a year or to result in death.
Appeals. Yes, you can. Your denial letter should explain. You typically receive only 60 days from the date of the denial letter to appeal. If you miss the deadline, you may have to start from the beginning. Recommend that you seek help by this point.
Quirks. Instead of applying online or in person, call the SSA at (800) 772-1213. One book on Social Security puts the burden back onto the SSA when it comes to form-filling and the nuisances of interpreting the forms. The SSA would know best anyway on how to fill out its own forms. If you don’t finish it all in one day, the SSA will schedule another phone call to work around your schedule.
You can get SSDI while still serving on active duty. In what scenario? Assignment to the Warrior Transition Unit (WTU). Not easy, but not impossible.
Get help. Check out Side by Side Solutions, LLC, https://www.facebook.com/sbssolutions, founded by Lisa Hiering, mother of a disabled Marine.
Vocational Rehabilitation & Employment (VR&E)
VR&E intends to help a veteran fix his vocational impairment or employment handicap, resulting from a service-connected disability. It consists of five tracks. I’ll just cut to the chase.
How much is it? Track 4 (employment through long-term services) can work just like the Post-9/11 GI Bill and pay a monthly housing stipend, or subsistence within the VR&E language. Think of it as BAH. It depends on the school and on attendance, but we could reasonably estimate around $1,500/month.
There’s also a Track 3 (self-employment) that could pay up to $100K towards business startup costs. Yes, up to $100K, to you. You can ride Track 4 up through a doctorate and then get $100K through Track 3 to start your practice.
How long will it take? Expect about a month to get a meeting with a Voc. Rehab. Counselor (VRC), then another two months to get a decision.
Claims, conditions, criteria. Fill out a VA Form 28-1900 at www.ebenefits.va.gov/ebenefits/login. The VA will also ask you to fill out an Individualized Employment Assistance Plan (IEAP), in which you outline exactly what it’ll take to help you. You’ll need at least a VA 20 rating, or VA 10 for a serious employment handicap.
There’s a 1,200-page manual called the M28R that the VRC uses to do his job. If you’re wondering what questions he’s trying to answer, then check out Part IV, Section B, Chapter 2 (evaluation and planning determinations).
Appeals. Can you? Yes.
Quirks. The C in VRC may stand for counselor, but you should treat him like the C&P examiner. Think of him more as an interviewer.
Get help. Check out attorney Benjamin Krause at www.DisabledVeterans.org.
Zero Property Tax · State-Level
Some states, like Texas or Florida, provide zero property tax for disabled veterans. Also called a homestead exemption. Typically for VA 100. Rules vary by state. For a quick list of states that offer this, check out https://hadit.com/disabled-veterans-property-tax-exemptions-state/.
For a summary of all benefits by state, check out https://myarmybenefits.us.army.mil. It’s an Army website that summarizes veteran benefits applicable to all service members.
Free College for Dependents · State-Level
Florida and Texas also offer free college tuition in-state up through a BA/BS for the dependents of a disabled veteran. Typically for VA 100, but a lower rating might suffice. Varies by state. Check out https://www.affordablecollegesonline.org/college-resource-center/scholarships-for-veterans-and-dependents/.
Although not direct cash, that’s still a BA/BS degree that would’ve cost $40K at a public four-year college (in-state student), $90K public four-year (out-of-state), or about $180K private.
Bonus · Four More Financial Freedom Hacks!
House Hack · VA Home Loan Guaranty
Use the VA home loan guaranty to get zero down on a residential property. This hack lets you obtain up to a four-plex. You could reside in one unit and rent out the other three. In the unit you live, you could further hack that with roommates or Airbnb. Eventually, you could refinance to then re-use the VA home loan guaranty and obtain yet another multi-family.
Credit Card Hack · SCRA (Title 50 USC Chapter 50)
Credit cards typically come with a low introductory rate (anywhere from 0% APR to a little more) before becoming about 20%+ APR. However, if you serve on active duty or if the military called you onto active duty, among other benefits, the SCRA provides a cap at 6% APR and a waiver of service and renewal fees.
By the way, Chase gives me 0% APR as part of its SCRA benefit. If your side hustle consists of e-commerce, use this credit card hack to boost your margins from arbitraging goods. How often do the credit card companies check? About once a year, otherwise, they use your anticipated (hint, self-reported) end date. Self-reporting applies to those with indefinite contracts. If this is you, I’m sure you can see how you could self-report an end date far into the future.
Student Loan Hack
On 21 Aug. 2019, President Trump signed a memo to cancel student loan debt for disabled veterans. To qualify, you’ll need to have either reached VA 100 or have been approved for SSDI. See https://disabilitydischarge.com for details.
Time Hack · Army Career Skills Program
The Army’s Career Skills Program (CSP) allows a Soldier to spend the last six months of active duty interning with a school or employer. While on CSP, the Soldier still gets paid as if on active duty but instead reports elsewhere. I’ve seen this flow as smoothly as a one-page form signed by an OIC. Are you separating or retiring? Do you have a friend who also happens to have her own business? It’s like shaving six months off your contract.