If you're really unwilling to be settled in places with poor conditions or too close to the front lines, you can always take a few steps back, follow the supply line of the transport ships to more convenient places for settlement, which would barely meet the 'nearby settlement' preferential terms.
Of course, the number of veterans each year in the Alliance is particularly large—considering the size of the army, it stands to reason. Positions with certain governmental characteristics simply cannot accommodate everyone. Mainly, it's still various levels of officers who are mostly settled through this method.
However, ordinary soldiers and sergeants actually have it relatively well. After they retire, they often directly receive a relatively high social rank, which directly translates to a pretty decent monthly allowance. Even if there aren't any good positions, living is not a big problem.
