Tips for disabled Veterans to help save for retirement

Voya Cares and Easterseals recently launched original research to look beyond efforts to hire Veterans to better understand what it means to support Veterans with disabilities and their caregivers. One key finding shows that they lack confidence in their retirement readiness.

Military service members experience strong support to meet their financial, health and family needs, but transitioning into civilian life opens up questions about Veterans’ support resources and potential employer benefits, especially when it comes to preparing for retirement.

Veterans are particularly looking for assistance with their financial health: only a bit over half expressed satisfaction with their financial health, according to research by Voya Cares and Easterseals. Veteran employees who have a disability are particularly struggling, more likely feeling they are underemployed, with a lower household income, more debt and less in retirement savings than nondisabled Veterans.

Disabled veterans have a variety of options to help bridge the financial planning gap that may result when they leave service, provided by both the U.S. Department of Veterans Affairs (VA) and their employers; however, less than half of disabled Veterans are confident they are maximizing what is available to them through the VA.?

The financial area that disabled Veterans are least confident in is retirement planning: only 34% are confident that they will have enough money to live comfortably throughout their retirement, and more than 60% have less than $50,000 savings for retirement.

There is a clear gap between the perception of disabled Veterans resource availability and adoption.

VA retirement resources

The VA provides Veterans defined benefit pensions or monthly retired pay for life after at least 20 years of service, calculated based on years of creditable service.

Veterans who have disabilities, medical conditions, or injuries incurred or aggravated during active military service – no matter when or where they served, including physical or mental health conditions – may be eligible to receive a tax-free monetary benefit based on their disability. During Voya Cares’ research interview series, many disabled Veterans said they plan to rely on their disability compensation stipend from the VA throughout retirement. Forty-one percent of respondents to the online survey indicated that they will rely on VA disability payments as a source of retirement income.

While these resources may help today, disabled Veterans need to expect the unexpected and consider the cost of medical care as they age, housing, unexpected medical and other emergencies and the increasing cost of long-term care for yourself or a loved one.

In anticipation of the shortfall, 46% of disabled Veterans indicated that they also expected to supplement their retirement income by working full- or part-time.

Pairing employer benefits with VA benefits

The majority of civilian workers have access to a retirement benefit from their employer benefit from their employer. Sixty-two percent of disabled Veterans use the retirement savings plan offered by their employer, while only 17% say that a plan is available, but they do not use it. Disabled Veterans may want to consider how they can use retirement savings benefits from their employer in addition to VA benefits to bolster their financial cushion, including taking advantage of retirement account matches, as well as contributing to a health savings account (HSA) if they are enrolled in a qualifying high-deductible health plan.? An HSA can be used for eligible medical expenses both now and in retirement.? It’s important to note that there are special rules around use of HSAs when you are receiving services through the VA*.?

Simple retirement savings tips for the future:?

• Take advantage of “free” money: Some employers will match contributions that employees make to their retirement plans dollar-for-dollar, up to a certain percentage of their pay, with a maximum contribution of $23,000 in 2024. Disabled Veterans can choose to contribute enough to get their employer’s maximum matching amount to help bolster their retirement savings. Opting out of their employer-sponsored retirement plan may have serious ramifications for savings accumulation and tax benefits.
• Prepare for unexpected health care costs in retirement: Health savings accounts, or HSAs, can help disabled Veterans pay for eligible medical expenses both today and in the future*. When someone is enrolled in a HDHP and qualified to contribute to an HSA, they can realize multiple tax advantages including pretax contributions to reduce taxable income, tax-free growth and, when used to pay for eligible medical expenses, HSA withdrawals are tax-free. At the same time, the money saved can rollover from year-to-year, even into retirement.
• Save for the near and short term with ABLE Accounts: ABLE accounts are state-sponsored, tax- favored accounts under the same tax code as 529 education plans to help individuals with disabilities save. However, instead of being strictly for higher education, they can be used for qualified disability related expenses which many times relate to quality-of-life issues for the individual with a disability. Funds can be used for day-to-day expenses and to grow another accumulation account – to include retirement. Today, individuals with disabilities that began prior to age 26 may be eligible to contribute to an ABLE account, but starting January 1, 2026, the eligibility age will increase to 46 so more disabled veterans can qualify. Check to see if your employer helps its employees with enrollment or offers a matching contribution to ABLE accounts.

All data included in this article, unless where noted, is from Disabled Veterans and employers: moving from surviving to thriving. Voya Cares and Easterseals. April 2024.

*Individuals eligible for services through the Department of Veterans Affairs (VA) don’t lose their eligibility to fund an HSA merely by being eligible for such coverage. They lose eligibility for three months after receiving care through the VA system unless the care is:

• Select preventive care (see the US Preventive Services Task Force list of preventive services that receive a grade of A or B).
• Diagnosis, treatment, cure, or mitigation of an injury, illness, or condition that’s service related.

If you receive care for any other services from VA, you lose your eligibility to fund your account for three full months following the month that you receive care.

This material has been provided for educational purposes only. This material was created to provide accurate and reliable information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice.

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