Updated: Sep 19, 2018
A Disability compensation will only reduce my retirement pay? Slightly Twisted TRUTH. This is another statement that is based on a partial truth, then slightly twisted. Retirees with a VA disability rating of 40% or lower will have their military retirement pay reduced by the amount of disability compensation they receive from the VA. However, VA disability compensation is tax-free. So the net gain works in the veteran’s favor. Retirees with a VA disability rating of 50% or higher are eligible to receive Concurrent Retirement and Disability Payments (CRDP). CRDP awards veterans their full military retirement pay along with their full disability compensation payment. Military retirees with a disability rating may have their pay affected in other ways. The following article will give you more information regarding how VA disability compensation affects military retirement pay.