What is your opinion of the DoD Survivor Benefit Plan? Do you see it as an annuity or life insurance? Would you recommend this benefit?

2015-07-13T11:46:58-04:00

Upon my retirement in 2013, I felt excited and happy for the new adventure that I was about to start; however, at the same time I felt extremely overwhelmed and at times dumb. Dumb to the information that was being provided to me, such as the survivor benefit plan. I will admit that the instructor tried to explain it; however, the understanding that I had has never sat that well with me or even my wife. I understand that between the 25th months through the 36th month is the only time that I will be allowed to cancel this plan, and there is rarely an open season enrollment option available.

What is your opinion, if any, on the survivor benefit plan?

Are there better options in the civilian sector to buy into that will provide your beneficiary with the monthly payments?

Response by SCPO David Lockwood made Jul 13 at 2015 11:50 AM

2015-07-13T11:50:10-04:00

Annuity. If thye have nothing else I would recommend it.

Response by CAPT Kevin B. made Jul 13 at 2015 11:51 AM

2015-07-13T11:51:32-04:00

I had my financial adviser sift through all the cash flow options and going Max was the best deal for us. It may be different for others depending on what your post retirement income flows are.

Response by SFC Joseph Bosley made Jul 13 at 2015 11:54 AM

2015-07-13T11:54:49-04:00

I took it when I retired in '09. It was explained to me as basically paycheck insurance that when I kick the bucket the beneficiary will continue to get part of my retirement for a time afterwards. May be worth it, may not be. Honestly i looked at it as a way to keep some incoming in to give my family time to adjust to the loss of income when I die.

Response by COL Mikel J. Burroughs made Jul 13 at 2015 12:05 PM

2015-07-13T12:05:51-04:00

SFC Andrew Kretz I would recommend that you shop around for something else. I requested one of the options, but the amount you have to pay for the options is quite large and reduces you take home retirement pay for the benefit. I believe there are other options. I refuse to mention any because I'm not an expert. When I start drawing my retirement pay at age 60 (different for retired reserves, but same Survivor Benefit Plan) I plan on opting out and taking my chance with a long and healthy life. I have choice to use a life insurance policy instead of the Survivor Benefit Plan, hoping that the other half will be drawing SS Benefits when I'm gone! It is a personal preference in the end. I just think the cost is too high during the years you are alive and trying to live off your retirement income. There are others on RP that can probably provide some very good advice.

Response by LTC Stephen F. made Jul 13 at 2015 1:13 PM

2015-07-13T13:13:44-04:00

I see it as annuity for my wife who has stood by and supported me for much of my military career and all of my VA disability time. Unfortunately since Congress has not backdated mobilization credit to reduce retirement age by each period of 90 days of creditable mobilization going back to 9/11/2001, I will probably have to wait until October 2016 to activate my survivor benefit plan (SBP). As far as I know the survivor benefit plan has no reserves and like social security is based on Congress approving and appropriating funds to sustain them each year. I am hopeful that SBP will be solvent throughout my wife's life and beyond for all serving service members spouses to benefit from.

Response by SFC Everett Oliver made Jul 13 at 2015 1:37 PM

2015-07-13T13:37:04-04:00

I turned it down because my wife is 13 years my senior. Still wouldn't have it any other way...

Response by MSgt Keith Hebert made Jul 13 at 2015 2:18 PM

2015-07-13T14:18:43-04:00

The only problem with the plan that I have is:
If your spouse dies before you, you will not get the money back that you paid into it
If I am wrong please correct me

Response by PO1 John Miller made Jul 13 at 2015 5:21 PM

2015-07-13T17:21:16-04:00

My wife and I discussed SBP and decided that it was in our best interest to opt out. Going through all the red tape to do that (both of us signing a statement and getting said statement notarized by a Navy Legalman) was a pain in the ass but worth it. In my humble opinion private life insurance is the way to go.

Response by PO1 Glenn Boucher made Jul 14 at 2015 1:39 PM

2015-07-14T13:39:34-04:00

To be honest the way I saw SPB is that its over priced life insurance that you have to die quickly for in order for your spouse to get paid. I could be wrong but no matter how I looked at it, it just didn't make sense to do it.

Response by CAPT Hiram Patterson made Jul 14 at 2015 2:18 PM

2015-07-14T14:18:54-04:00

The only thing I don't like is the amount of money taken out to support the SRB program. But I had to do it to assure that my wife would get the 55% of my retired pay when I passed. Supposedly after you paid into the SRB for 30 years, the payments go away. But I've heard that pretty much never happens. Of course I have to pay $396 a month which is a killer.

Response by Lt Col David Wilson made Jul 14 at 2015 3:28 PM

2015-07-14T15:28:27-04:00

If you are concerned about survivor benefits for your spouse, you have three options to consider. The SBP, a Cash Value Life insurance policy, or a Revisionary Annuity. I suggest you meet with a financial advisor in your area (usually 3-6 months prior to retirement) and get illustrations for the Life insurance and the RA, and do you own compairsion to see which is the best deal for you and your family. Each has costs and benefits; the key is understanding what they are before you have to decide.

Response by LTC Private RallyPoint Member made Jul 14 at 2015 4:18 PM

2015-07-14T16:18:32-04:00

My opinion is that the SBP is too expensive. You can spend half as much to purchase a term insurance policy that will pay your spouse a lump sum that he/she can invest. If invested wisely, such a nest egg could provide him/her a lifetime monthly income equal to or greater than the SBP. This assumes that you've also ensured you're debt free or have enough insurance to cover both debts (e.g. mortgage) and the necessary lump sum for investment purposes.

Response by LTC Michael A. Staves made Jul 14 at 2015 4:41 PM

2015-07-14T16:41:16-04:00

I do not know if it has changed since I retired but I viewed it as too short term with a shelf life as people live much longer now. 65 comes fast and you might as well pay term insurance which also has a shelf life. Best is mutual insurance and one should obtain it young as it goes up significantly as you age.

Response by SFC Bill Graham made Jul 14 at 2015 4:56 PM

2015-07-14T16:56:47-04:00

I got my SBP briefing while clearing Finance on retirement. It was short, but pointless. I took it THEN did my researchand personally I see it as an annuity.

After I retired I got licensed as an investment advisor and I would recommend SBP over civiliancounterrpart based on costs versus benefits.

Response by SFC Jon Vandeyacht made Jul 14 at 2015 5:10 PM

2015-07-14T17:10:19-04:00

I did it. If your frugal you can find better or cheeper. I can afford the 214 a month that i pay. My wife is supposed to get her 55%. It isnt much but i have legion 10k vfw 10k and other life ins. The wife should be able to pay off all debt upon my death, and be able to live on the 1600/mo or so of my pay. She will also get the va dic if its service connected death and that is where filing a claim for service connection on everything comes in handy. I prefer easy and SBP is easy. I will pay a little extra for the easy button.

Response by MSgt Doug Miller made Jul 14 at 2015 6:47 PM

2015-07-14T18:47:49-04:00

I'm not happy about the fact that you don't get anything back if the spouse passes first. I only have four years to go so I'm not worried about it anymore.

Response by MSgt Doug Miller made Jul 14 at 2015 6:50 PM

2015-07-14T18:50:37-04:00

I only have four years to go so it's not a big thing now but I dont' like the fact that all is lost if the spouse passes first.

Response by CMSgt John Momaney made Jul 14 at 2015 7:10 PM

2015-07-14T19:10:28-04:00

I signed up for SVP after talking to retires who did not take it because they were going to take out a civilian plan instead. They never did that and life insurance was the first thing they dropped when money was tight. With SVP it comes out of my retirement pay for 26 years. I have three more years to pay. I wanted to make sure my wife has other income. So, my decision was made based on the above. Today's military pay may allow for greater savings and SVP is not needed. Your civilian job may have a strong 401K plan that meets retirement needs down the road. If you opt for the 401K strongly suggest you put the max 25% into it. This will also reduce your annual tax to IRS and your state.

Response by SGT Shane Scherer made Jul 14 at 2015 8:42 PM

2015-07-14T20:42:29-04:00

I think electing for this benefit has a situational element to it I was med boarded with a 70% rating from the Army at 28 with my 3 year high average not being very impressive as an e-5. At 28 let's assume I live to be 70+ definitely not worth it instead of 200 bucks to secure a small percentage of a small salary that $200 goes into an Ira every month that my wife is the sole benafactor of.

Response by CDR Eric Ford made Jul 14 at 2015 9:16 PM

2015-07-14T21:16:19-04:00

This is a very emotional time and the required choices only make it more difficult. If you don't take it and you choose to enroll later during an open enrollment, then you have to pay back all the years you were not previously enrolled plus interest. If you do enroll and your spouse passes away before you, then you lose what you previously paid. This is similar to Term Insurance, but the SBP costs much more. The other disadvantage that used to exist (not sure if it still does) required you to continue paying even after your spouse passed away. I believe this may have recently changed so you could stop paying if your spouses passes away first, but would need to be verified. The only good news is you no longer have to pay for life, which used to be the case years ago and now stops after 30 years (or at least that was the requirement I remember when I retired). If you pass first, then the question is will your spouse live long enough to recover what you previously paid into SBP or more. Women generally have a life expectancy 2 years longer than men.

A few additional items to consider. I have often been told the longer a person is in the military the lower their life expectancy. I have never researched this issue, but might be worth considering. Of course, there is also your current health. My wife was extremely ill and had a near death experience as I approached my eligibility for retirement. My decision was fairly simple - I needed to be able to spend more time with my family (wife & children) and take care of them physically & financially. Since there appeared to be an extremely low chance of my wife living longer than me and uncertainty of the job market, I chose to not take SBP and get $500K in life insurance on myself for 20 year plan for $32 a month from Navy Mutual Aid Association. My thought was in the rare case if I died and my wife survived, the $500k would provide about as much income as SBP (Survivor Benefit Plan) assuming she was to outlast me for about 20 or so years depending on how much the SBP would rise every year and assuming the $500K was not invested and did not make any additional money over time. I believe this to be the best decision financially for my situation. Some would also argue if you take the difference between SBP and Term Life and invest it automatically every month, you could create more assets over time.

Bottom Line - You have to do what is right for you and your family, but your spouse must agree if you choose not to take SBP.

Response by SSG Private RallyPoint Member made Jul 14 at 2015 9:26 PM

2015-07-14T21:26:48-04:00

It looks like an annuity to me. It even talks about annuitization somewhere in the paperwork, but nobody I talked to ever said it out loud. The briefing was given to me by a contractor for the HR people, and didn't really know what an annuity was, but I asked a retired JAG buddy, and he said it is.

Response by MSgt Frank Graham made Jul 14 at 2015 11:26 PM

2015-07-14T23:26:47-04:00

It was cheaper and better in the old days on active duty but when you got out you gave them half your retirement and the would give that half back to the wife every month. Lots of things happen in life divorce, death, etc. In my case my wife died. If you don't marry again I think they keep the cash. A great Idea that got turned into another way to screw us over, over the years. My best advice is to save 10 - 20 perent of you income. Don't trust the fund guys. All my friends that invested to be millionaires are still working.

Response by SSgt John Parcell made Jul 15 at 2015 9:13 AM

2015-07-15T09:13:45-04:00

I entered active duty in the USMC in 1980 and got out after the Gulf War. I then re-enter the PA Army Nat'l Guard in 2001 and retired in 2013. I WASNT GIVEN ANY EDUCATION OF SURVIVORS BENEFITS! I have had several deployments after 9-11-01 but only 2 count for earlier retirement . So I took option C which is to pay out of my retirement when I retire at 59. and cover my wife with some after I am gone.

Response by CPT W Brown made Jul 15 at 2015 3:10 PM

2015-07-15T15:10:15-04:00

Having left the army long ago, I am not familiar with the program.

Looking at the others' comments, though, I interpret it to be like a term-life insurance policy of sorts. Pay into it monthly, and your spouse receives some payment if you pass away. You get no money if your wife pre-deceases you.

I think the best way to look at it is through a sequential series of questions:

1) What are your family's ongoing financial needs if you are no longer around to fulfill them through your wages?

2) Once identifying them, what is the lowest cash cost to obtain financial cover if you pass away?

3) Then assess the risk or likelihood of you passing away.

4) Finally, if I did not buy the term insurance (or whatever policy of continuing payment to spouse), how much money could I earn if I regularly put that money elsewhere, say, the stock market?

Having a monthly premium to pay may be something that forces a discipline that may be needed as the press of financial obligations hit the family.

We dealt with this when our unmarried daughter deployed to Afghanistan. It was strongly urged by her command that she take some type of offered life insurance policy. She asked what I would do. I told her to not bother, considering the % of deaths of those deployed (1 is too many, but percentage wise, the numbers were not high). Instead, she regularly deposited money into her stock brokerage account that invested in different positions in a portfolio. She is financially much better off having not taken any deployment life insurance.

Of course, we are a family of risk takers, betting on success and life rather than focusing on covering failure or death. I don't regret it, but what you do should fit your appetite for risk and financial situation.

Response by SGM Private RallyPoint Member made Jul 15 at 2015 8:11 PM

2015-07-15T20:11:22-04:00

A lot depends on what you perceive as your relative life expectancy. I'm older than my wife and statistically guys die 3 years sooner than gals do. So it's a nice way to make sure my wife is taken care of without costing us too much.

Response by PO1 Michael Wolfe made Jul 16 at 2015 11:50 AM

2015-07-16T11:50:40-04:00

I personally look at this plan as retirement income insurance and the only way you can get the max benefit from it is if you die early and your wife lives a long life. There are other plans out there that if time is on your side are cheaper and better but for you to get the type of benefit you get with SBP you have to pay into it for many years and have a good return on the money you invest. the rule of thumb to always remember is you don't get something for nothing if you don't have a plan that will support your wife for the rest of her life if you die now for any reason than I suggest it. That is the way I looked at it when me and my wife discussed it and so far thank god it has been a bad investment but the day is young and I don't know what tomorrow holds so I'm glad that I'm paying into it. I will also say I don't expect it to be a cure all so I do have other things going Life insurance and investments so that if/when that day comes my wife and children won't inherit a burden but a legacy.

Response by LCDR Doug Nordman made Jul 16 at 2015 4:03 PM

2015-07-16T16:03:05-04:00

Folks, there's no comparison between the Survivor Benefit Plan and term life insurance. They're two completely different products with two completely different payouts, which is why they cost two completely different premiums.

SBP is a life annuity with the same cost-of-living-adjustment paid by Social Security. Nearly half of the expenses are subsidized by DoD, so you cannot find a COLA'd life annuity on the open market for the price of SBP.

You can find cheaper term insurance because it has no comparison to SBP.

I'll add some links at the end of this post, but here's a summary of the issues:

SBP premiums are paid for 30 years AND until the retiree reaches age 70. Both of those have to occur before the policy is considered permanently paid up. This can make SBP a good deal for active-duty retirees in their 30s and 40s. You're less likely to reach paid-up status if you're retiring from active duty in your 50s or if you're a Reserve/National Guard retiree.

SBP is an extremely good deal for "gray area" Reserve/Guard retirees (retired awaiting pay). You can insure 55% of your pension starting the day you retire awaiting pay, and you pay no premiums until your pension starts. Then you're only required to pay two years of premiums before making a cancellation decision.

Women are more likely to outlive men. It's also true that military retirees tend to have shorter lifespans than civilians, but it's only by a few years and (in most cases) can be mitigated by a healthy lifestyle. Of course if you have a high disability rating or a medical retirement then you're living under a different set of statistics. We also don't have longevity data about some occupational hazards like exposure to ionizing radiation or submarine atmosphere-control chemicals.

Yes, if your spouse dies before you do, then all of your SBP premiums have been wasted. It's just like paying premiums for home insurance, liability insurance, and vehicle insurance all your life and "wasting" that money too-- until disaster strikes. If you have enough assets to self-insure your spouse's outliving you (and your pension) then they do not need SBP.

SBP is initially offset by Dependent's Indemnity Compensation. Efforts to change that law have failed for over a decade, but the campaign will continue. I've linked below to a summary.

Your spouse (SBP is their choice) has to decide whether (if you die first) they want 55% of your pension (with a COLA) for the rest of their life. That amount will cost 6.5% of your pension per month (rising every year by the COLA) until you're at least 70 years old and have paid at least 30 years of premiums.

If your spouse has their own assets (a pension or investments) then they may be fine. If they can collect their own Social Security (or survivor's Social Security benefits on your earnings record after your death), that may be enough.

Term life insurance can be used to bridge the gap between your retirement and age 70 (the age at which Social Security benefits reach their maximum payout). All that term insurance does is deliver a lump sum for your spouse to invest as self-insured assets. It may be enough, but if that lump sum is used to buy an annuity then they might as well have chosen SBP.

One very important niche, new in 2015: if you have a disabled child who will need your support as an adult, then SBP can now be paid to a special needs trust. I'm not aware of any insurance company that will do this at all, let alone for a 6.5% premium.

The links in these posts download additional PowerPoint briefs and documents.
SBP:
http://the-military-guide.com/2011/04/11/survivor-benefit-plan/
http://the-military-guide.com/2011/04/13/more-sbp-details/
Reserve/Guard SBP:
http://the-military-guide.com/2011/04/14/the-reserve-component-survivor-benefit-plan/
SBP info from the DFAS website:
http://www.dfas.mil/retiredmilitary/provide/two-ways.html
MOAA info on the SBP-DIC offset:
http://www.moaa.org/Main_Menu/Take_Action/Top_Issues/Survivors/SBP-DIC_Offset_for_Survivors.html

Survivor Benefit Plan - Military Guide

(Thanks again to Tomcat98 for backing up my research with impressive actuarial data!) This “simple little SBP summary” mutated into a two-part description. Today we’ll cover SBP for active-duty retirees and in the next post we’ll cover the Reserve Component SBP. The SBP will cost you up to 6.5% of your pension, so it’s a …

Response by MSgt Mayo Sifford made Jul 18 at 2015 12:49 AM

2015-07-18T00:49:55-04:00

I retired in 1969 (yeah, I'm really long in the tooth) and over the years I paid in $35,500 in SBP premiums. I was "paid up" in 2008. That's the year they put a cap on SBP payments at age 70 -
which I hit in 1999. If it had been in place, as it is now, SPB would have been an even sweeter deal. When I die my wife will get $1,132/month until she goes (let's don't forget that my base pay as an E-7 at the time was $560/month.) The kicker here is that she will only have to live for 27 months to recoup every dime I paid in premiums. The premiums are 6% of your retired pay and worth every darn penny!! If she goes first - oh well - more money in the pot for deserving widows.

In answer to your question, I doubt there is a civilian insurer that would even come close to SBP.

Same goes for my NSLI policy which will pay out $10,000. I also has paid me annual dividends of $300 to $495 for at least thirty years and probably more. It also has a current cash value in excess of $8,000.

Before you ask - no, I was not a person affairs weenie - I just lucked out. Hope y'all do the same.

Response by 1SG Harold Piet made Jul 22 at 2015 6:10 PM

2015-07-22T18:10:32-04:00

This is something that should be thought about, Prayed about long before the decision is made, My Father chose it and my brother did not, the difference for my mom and sister in law is so grand, as both of them have passed. This is a big gamble but as most men die before their spouse. it is an insurance that should really be considered. I signed up for it but thankfully am still paying for it.

Response by LTC Jason Strickland made Aug 6 at 2015 10:24 AM

2015-08-06T10:24:27-04:00

Good question, SFC Andrew Kretz. My wife and I mulled this over for a long time. I was not in favor of the cost/benefit and thought I could have better results investing the money on my own. My wife was in favor of the added security. Needless to say, we are enrolled in the SBP. Together we decided that my wife's sense of security and the financial components of SBP outweighed what I might be able to do on my own.
Here's a good blog that explains a lot of the details:
http://militarysaves.org/blog/941-why-you-should-care-about-the-survivor-benefit-plan

Why You Should Care About the Survivor Benefit Plan

In most circumstances, when servicemembers retire at 20 years they will receive a “pension”. A pension is defined by Merriam-Webster’s dictionary as “a fixed sum of money paid regularly to a person, or a gratuity granted as a favor or reward, or one paid under given conditions to a person following retirement from service or to surviving dependents.” When military members serve 20 years on active duty or 20 “good years” in the reserves they...

Response by CW5 Private RallyPoint Member made Aug 6 at 2015 1:04 PM

2015-08-06T13:04:37-04:00

The government knows best how to provide for your surviving spouse than you do? If you have no skill for numbers or saving money then go ahead.
I believe that you can save that money yourself and have it available when you are gone. It has to do with financial planning from the day you decided to go to 20 years. If you can't save up that much, there are several life insurance companies out there. Also know that you can price check your policy every year if you wish to see if someone can best the policy you have.
If you want to really get started planning for the future, check out Dave Ramsey's website.

Response by CSM Private RallyPoint Member made Jul 13 at 2018 8:00 AM

2018-07-13T08:00:05-04:00

Get advice and input from a financial advisor. We used USAA to assist use/the decision. I was convinced that we would opt for term insurance and decline SBP. After running the numbers and considering all factors we are taking SBP. I will be 60 when i retire and w/the VA disability rating impacting the cost of insurance - SBP was not expensive after all. Don't just consider the cost of SBP, widen your aiming stakes. SBP will also enable us to spend more our retirement savings to enjoy retirement