Alright, this is a really cool question, which I have (luckily enough :D) done a bit of research in prior to this. If your interested in veteran settlement, as opposed to social integration, or if you just want to read more up on it (yay background knowledge!), see my answer here. Like this one, a large portion of it is literally a reformatted chapter of my thesis.

Now, there’s a lot of answering that goes into this question, and I would go so far as to suggest that the lack of an official, real, settlement and reintegration policy was one of the (many, many) factors that contributed to the chaos of the Late Republic. As more and more men served out their terms, they were essentially punted to the curb on their return home. The veterans who were actually given land or settlements had no structure, no real experience with farming or civilian life in general, and were therefore...well...not necessarily the best farmboys.^1 There originally was no system. And this lack of a system really screwed the pooch.

When Augustus took power, he recognized this, especially seeing as he had personally benefited from said veterans’ boredom and eagerness to go back to war. He seemed to understand that these men needed integration, rather than being ignored. Weird concept, huh. Of course, he phrased it in the standardly braggy patriotic ways,^2 but what he actually did happened to work quite well.

Settlements, especially those in the provinces, were outside influences planted by the Roman government to assert control over a region. With that in mind, the local reaction to these settlements is an essential study to understand the lives of the veterans living within them. Soldiers did not have a good reputation for civility, and were sometimes portrayed as brutish foreigners.^3 As inhabitants of the land, they had to find their social niche so they would not be seen as hostile occupants. These men developed their colonies as trade hubs, inviting locals to bring their goods and to simultaneously cultivate goodwill.

With the reforms of Augustus, veterans were satisfied with the terms of their settlement. The state-sponsored bonuses had a great deal to do with this, but the maintenance of their former military orders had a similar influence on these men.^4 After settling, they maintained a military approach to their lives, with officers still in a position of authority and with the former infantry banding together in their previous units to accomplish assigned tasks.^5 Thanks to colonies being founded by entire legions, due to the sheer number of the men Augustus had to discharge, the cohesion of each colony was incredibly strong. Men who may not have necessarily been good farmers were given other tasks, working with the rest of their cohort to build the town and the surrounding area. They created villas, generally inhabited by their officers,^6 temples for both their town and the surrounding areas,^7 aqueducts and reservoirs,^8 and, of course, Roman roads.^9 Roads were the first development to be built,^10 connecting the new colony to the population centers in the province. Ostensibly, these were for trade, but they were also instrumental if the army needed to use the colony as a staging point against a rebellion within the province.^11

The extensive construction work also helped to spur on the economy of the provinces. Colonies were trade hubs, with their brand new roads and steady supply of veterans willing to spend their pensions.^12 The newly settled colonists needed a steady supply of food, pottery, stone, and luxury goods, and locals could count on them to pay for those services, as well as projects sponsored with relative frequency by a wealthy patron in Rome.^13 One commentary on the economic power of the veteran colony comes in Strabo’s Geography, written around 20 BC, when he notes that:

“At present commerce continues [in Hispalis], though lately Baitis, on account of Caesar’s soldiers having been settled there, is greater, although it was not colonized as splendidly.” *(νυνὶ δὲ τὸ μὲν ἐμπόριον συμμένει, τῇ τιμῇ δὲ καὶ τῷ ἐποικῆσαι νεωστὶ τοὺς Καίσαρος στρατιώτας ἡ Βαῖτις ὑπερέχει καίπερ οὐ συνοικουμένη λαμπρῶς.)*^14

The newness of a colony encouraged provincials to flock to it, to indulge themselves in the newly built Roman city, and to accept the new arrivals and the prosperity which accompanied them.

Not all colonies were accepted as readily as Baitis, however. In 60 AD, the first target of the Iceni revolt in Britain was the veteran colony at Camulodunum. Tacitus describes the actions of the Romans in this way:

“But the opposite was returned, as far as the kingdom was ravaged by the centurions, his house by slaves, as if they had been seized as captives. Now first, his wife Boudicca was scourged with whips and his daughters were defiled after they were violated. The first men of the Iceni, as if the whole region had been taken as a gift, were divested of their ancestral goods, and the relatives of the king were taken as possessions. [...][they planned] with sharpest hatred against the veterans. Those recently settled in the colony of Camulodunum drove out those who were living in the area, thrust them away from their fields, and addressed them as captives and slaves; the wanton behavior of the veterans was encouraged by the soldiers, living similar lives and hoping for the same license.” *(quod contra vertit, adeo ut regnum per centuriones, domus per servos velut capta vastarentur. iam primum uxor eius Boudicca verberibus adfecta et filiae stupro violatae sunt: praecipui quique Icenorum, quasi cunctam regionem muneri accepissent, avitis bonis exuuntur, et propinqui regis inter mancipia habebantur. [...] acerrimo in veteranos odio. quippe in coloniam Camulodunum recens deducti pellebant domibus, exturbabant agris, captivos, servos appellando, foventibus impotentiam veteranorum militibus similitudine vitae et spe eiusdem licentiae.”)*^15

The colony was settled specifically to acclimate the locals to their new Roman overlords;^16 unfortunately, these men were not necessarily good settlers, nor did they have any interest in cultivating goodwill in their new homes. The issue was not necessarily Roman control or settlement: the king of the Iceni included the Roman emperor in his will as a gesture of goodwill in the hope that it would allow the two kingdoms to live in peace.^17 The abuses of the veterans simply made it impossible for the locals to tolerate them for an extended period of time, and the revolt that crushed the colony also destroyed a legion and the prosperous town of Londinium.^18 This event was a clear outlier, exhibited by the lack of any other similar revolts in settled areas. The message, however, was evident: veterans had to act as members of a society, rather than as conquerors.

The provinces did not necessarily have a high opinion of soldiers, let alone veterans who came in, who took up valuable real estate and providing a constant reminder of Roman conquest. The easiest solution to this was to allow veterans to settle themselves on the lands they had served.^19 Because legions in the early Empire were essentially garrisons, they were able to attempt to forge strong relationships with the locals over the course of their 25 year military term, including pseudo-marriages^20 and trade partnerships. Even so, active soldiers were seen as boors^21 who often could not speak the local language.^22 Due to these barriers, many veterans simply chose to return to the homes from which they had originally been recruited.^23 Veterans seemed to have been allowed to choose where they wished to settle, essentially giving them the choice of their birthplace or the region in which they had spent most of their lives.

Despite the attitude of the locals, or perhaps because of it, veterans held a collective sense of pride regarding their former military careers. Retired legionaries always identified themselves by rank, legion, and cohort on their tombstones;^24 any rewards the soldier had earned were also added. Despite being retired and assimilating themselves into society, the most important thing to these men was their former career. These tombstones primarily stem from the first and second centuries AD, and few tombstones from the Republic are marked with the same martial enthusiasm.^25 The pride which these former professional soldiers held for themselves and their respective military units was held throughout their lives.