Should You Enroll in the Survivor Benefit Plan?
The Survivor Benefit Plan (SBP) can replace up to 55% of a military retiree's pay for their family after death—but the decision to enroll isn't automatic. This post breaks down how SBP works, what it costs, and the key factors service members should weigh before choosing to opt in or out.
MILITARY RETIREMENTRETIREMENTSURVIVOR BENEFIT PLAN
Christopher Flis
8/18/20263 min read
Military service members approaching retirement have important decisions to make regarding their benefits. After years of service, Veterans are entitled to military retired pay that lasts their lifetime, and in some cases their spouse's as well.
Unfortunately, retired pay is one of the benefits that ends upon the death of the Retiree. Therefore, considering the impact a Retiree's death has on family members is of utmost importance. Fortunately, some benefits can survive the Retiree's death. The Survivor Benefit Plan is one such benefit.
What Is the Survivor Benefit Plan?
The Survivor Benefit Plan (SBP) offers monthly income of up to 55% of your retired pay to your dependents in the event of your death. SBP is essentially an annuity payable to your designated beneficiary. In most cases, SBP is relatively inexpensive compared to private life insurance products. Of course, each individual situation is different. While SBP typically provides income to your spouse, it can do the same for your children or others in some instances.
To enroll for the SBP, a participant agrees to pay a portion of his or her retired income toward the premiums, capped at 6.5% of your retired income per month, which results in the maximum benefit of 55% of your base retired pay. A critical point here is that SBP premium payments are pre-tax.
One nuance worth flagging: SBP is often described as requiring premiums for "30 years." That is close, but not quite complete. Under current DFAS guidance, you reach "paid up" status, meaning no further premiums are owed while the full benefit is still provided, only once you have made 360 monthly payments (30 years) and reached age 70. If you retire young, as most service members do, you may hit the 30-year mark well before turning 70, in which case premiums continue until age 70 arrives.
If your family elects a lower benefit amount, the premiums decrease accordingly. If you add qualified dependents to the plan along with your spouse, the premiums will increase. There is a minimum level of coverage required, and DFAS calculates that minimum individually for each retiree, so it is worth confirming your specific figure directly with DFAS rather than assuming a flat dollar amount. For a full breakdown of how SBP costs are calculated, see DFAS's official cost page.
Survivor Benefit Plan Options
Participating Veterans have options to select who will receive the benefit should they pass away. Typically, spouses are the primary concern, however, several variations of "family" exist. Therefore, both at retirement and at life's inflection points, namely divorce, the death of a spouse, or the birth of a child, reviewing your SBP options is strongly recommended. Fortunately, Resilient Asset Management maintains strong contact with the Military's SBP Specialists, so arranging a conference call is a very simple matter.
Is the Survivor Benefit Plan Right for You?
The SBP offers an affordable income source that provides peace of mind for many military families. The benefit payments are protected against inflation and are adjusted every December based on the Consumer Price Index. There are no health exams or other qualifying requirements to participate.
While SBP provides a bevy of benefits, it isn't necessarily right for everyone. For example, if a Retiree's spouse is considerably older or is in ill health, SBP may not be needed. Moreover, if you have long-held permanent life insurance, then maintaining that policy may be advisable. In short, there is no one-size-fits-all advice for Retirees.
To make the best decision for your family, it helps to receive an objective opinion about your unique circumstances from a trusted professional. Namely, you can partner with a financial expert like the team at Resilient Asset Management. And doing so prior to retirement is advisable since SBP elections are exceptionally difficult to undo. A Veteran himself, founder Christopher Flis specializes in advising military service members as they progress through their final active-duty years and into retirement. Schedule a 30-minute introductory meeting or contact us at chris@resilientam.com or (901) 318-3423.
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