Military Surivor Benefit Plan (SBP)
- Thread starter JDARNELL
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oohh - my grandfather retired from the USNR and when he found out what the SBP gave my grandma, he was quite disappointed. My now-husband looked into it as part of his divorce and opted out - it's expensive (basically an annuity) - I think if you took the amount that you would pay for the annuity and project that out side-by-side with investing tthe amount hat versus the monthly amount of the annuity, you might get a better idea.
Deserat
Deserat
Spouse will get her own pension someday so she decided that she'd rather have more of mine now. It sure was difficult persuading the personnel people that she wasn't under some kind of duress or just plain ignorant.Tomcat98 said:
I think there are a lot of SBP changes either in effect or in the pipeline. One of them is eliminating the former offset for Social Security, and another one would stop SBP premium payments after a certain number of years. Those may make the program a lot more effective (and cheaper) than life insurance.
I crunched the numbers extensively when I retired. After everything, I decided to buy as much as I could (which amounts to replacement of 55% of our retirement check if I die.) As Nords noted, they are phasing out the SS offset (which decreased the check a surviving spouse received once he/she became elligible for SS under the SS record of the military spouse) and you no longer have to pay premiums after a certain point (I think it is after paying premiums for 30 years).
- From an "expected payoff per dollar of premiums" perspective, SBP is a better deal for some couples than for others. It is a super deal if the military member is male, in poor health, and older than his wife. Regardless of the relative ages and other factors, it really boils down to whether the surviving non-military spouse would be abe to have a suitabe qualty of life without the SBP check. If not, then you need to do something. At least in my case, I could not duplicate the protection offered by SBP with a life insurance product/anuity. I looked.
Other factors to consider:
-- There are sales folks out there with slick brochures trying to convince retiring folks that their company offers better protection than SBP at lower cost. All factors considered, I don't think it is true.
-- The survivors payments under SBP are inflation indexed and go on as long as the spouse lives.
-- Premiums you pay for SBP are pre-tax
-- The SBP program is supplemented by tax money. That means there's more going out than coming in--a sign that this is a good deal. This supplement is heaviest for the first few hundred dollars of retirement pay covered, and declines after that. IMO, nearly every service member would benefit by signing up for a very minimal base amount (I can't recall the specifics on phase-out of the govt kick-in)
My wife doesn't have a pension income of her own. The way I see it, she made a lot of contributions/sacrifice that enabled me/us to earn a pension, and it was worth the SBP premium in our case to assure she continued to get some benefit from it after I shove off.
- From an "expected payoff per dollar of premiums" perspective, SBP is a better deal for some couples than for others. It is a super deal if the military member is male, in poor health, and older than his wife. Regardless of the relative ages and other factors, it really boils down to whether the surviving non-military spouse would be abe to have a suitabe qualty of life without the SBP check. If not, then you need to do something. At least in my case, I could not duplicate the protection offered by SBP with a life insurance product/anuity. I looked.
Other factors to consider:
-- There are sales folks out there with slick brochures trying to convince retiring folks that their company offers better protection than SBP at lower cost. All factors considered, I don't think it is true.
-- The survivors payments under SBP are inflation indexed and go on as long as the spouse lives.
-- Premiums you pay for SBP are pre-tax
-- The SBP program is supplemented by tax money. That means there's more going out than coming in--a sign that this is a good deal. This supplement is heaviest for the first few hundred dollars of retirement pay covered, and declines after that. IMO, nearly every service member would benefit by signing up for a very minimal base amount (I can't recall the specifics on phase-out of the govt kick-in)
My wife doesn't have a pension income of her own. The way I see it, she made a lot of contributions/sacrifice that enabled me/us to earn a pension, and it was worth the SBP premium in our case to assure she continued to get some benefit from it after I shove off.
More info:
When I was researching this, I found the USMC site to be very helpful. It is at
https://www.manpower.usmc.mil/portal/page?_pageid=278,1950391&_dad=portal&_schema=PORTAL
- The government pays 40% of the total costs for SBP, the premiums paid by retirees pay for 60%. That tells you something right there.
- The calculation of premiums for SBP is a little complicated (more details are at the link above). Figures below are for 2002, they've probably changed slightly since then.
- Coverage of the first $547 in retirement pay ( times 55%= a spousal benefit of $300 per month, inflation-protected, etc) requires an SBP premium of $13.67
- Coverage of $2188 in retirement pay (four times as much as the case above) requires an SBP premium of $142 per month.
So, there's a lot of bang-for-the-buck in the first few hundred dollars of coverage. But, even for higher amounts, I couldn't match the true coverage of SBP through other means. Again, every family is different.
When I was researching this, I found the USMC site to be very helpful. It is at
https://www.manpower.usmc.mil/portal/page?_pageid=278,1950391&_dad=portal&_schema=PORTAL
- The government pays 40% of the total costs for SBP, the premiums paid by retirees pay for 60%. That tells you something right there.
- The calculation of premiums for SBP is a little complicated (more details are at the link above). Figures below are for 2002, they've probably changed slightly since then.
- Coverage of the first $547 in retirement pay ( times 55%= a spousal benefit of $300 per month, inflation-protected, etc) requires an SBP premium of $13.67
- Coverage of $2188 in retirement pay (four times as much as the case above) requires an SBP premium of $142 per month.
So, there's a lot of bang-for-the-buck in the first few hundred dollars of coverage. But, even for higher amounts, I couldn't match the true coverage of SBP through other means. Again, every family is different.
OAG
Thinks s/he gets paid by the post
Re: Military Survivor Benefit Plan (SBP)
Another site http://www.military.com/benefits/survivor-benefits/survivor-benefit-plan-explained. It also mentions the phase out of the SS offset which will be completed in 2008. In my case I signed up for the minimum in 1979 when I retired cost has risen from $7.50 per month to $30.76 (2006 premium) for an annuity of $441.19 per month w/COLA of course. (Spouse coverage; different if you want to cover children). Additionally, there are no premium payments after 30 years, which for me is coming in July 2009.
I have friends in my age group that opted for the full amount 55%. Sounded good at the time but they are still around and are paying very significant monthly premiums which they do not feel are going to have much value to their spouses.
Another site http://www.military.com/benefits/survivor-benefits/survivor-benefit-plan-explained. It also mentions the phase out of the SS offset which will be completed in 2008. In my case I signed up for the minimum in 1979 when I retired cost has risen from $7.50 per month to $30.76 (2006 premium) for an annuity of $441.19 per month w/COLA of course. (Spouse coverage; different if you want to cover children). Additionally, there are no premium payments after 30 years, which for me is coming in July 2009.
I have friends in my age group that opted for the full amount 55%. Sounded good at the time but they are still around and are paying very significant monthly premiums which they do not feel are going to have much value to their spouses.
Re: Military Survivor Benefit Plan (SBP)
Pretty impressive considering it was written by a squid aviator to boot... considering his growing writing career it'll be interesting to see how long Chris Michel hangs around with Monster.com.
Military.com's website and their book "The Military Advantage" is the best benefits guide I've ever seen, hands down, bar none.Old Army Guy said:
Pretty impressive considering it was written by a squid aviator to boot... considering his growing writing career it'll be interesting to see how long Chris Michel hangs around with Monster.com.
mickeyd
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Most of my time in the Army was spent in reserve duty as I was only on AD for about 4 years ('66-'70). When I hit age 60 I became eligible for a military pension based on my AD time as well as my reserve duty (20+ years).
I was pleasantly surprised at how much of Uncle Sam's money that I receive each month and readily enrolled in SBP as I knew that it was a cost effective way to look after DW if I drop over before she does. The SBP cost is only about 6.5% of my gross pay and I calculated this to be an excellent option to accept at the time. I still do.
I was pleasantly surprised at how much of Uncle Sam's money that I receive each month and readily enrolled in SBP as I knew that it was a cost effective way to look after DW if I drop over before she does. The SBP cost is only about 6.5% of my gross pay and I calculated this to be an excellent option to accept at the time. I still do.
When I look at the option of SBP vs say term life, I think I can make the case that term is better for the first 30 yrs. However this potentially leaves you roughly from age 70 on with no coverage assuming you can't get insured due to health, if you can its now to expensive, etc. With a more permanent insurance product I think it would be to costly.
All the articles I see are either sales oriented or touchy feely with little factual comparison.
I think I am in the SBP category, but can you take a lesser base amount and do something with the difference? Is there a knee in the curve and how do you take into the risk of what happens 30 yrs later? I don't think you can. I don't think I am looking for a clear cut anser but rather other ways to look at this issue.
Tomcat98
All the articles I see are either sales oriented or touchy feely with little factual comparison.
I think I am in the SBP category, but can you take a lesser base amount and do something with the difference? Is there a knee in the curve and how do you take into the risk of what happens 30 yrs later? I don't think you can. I don't think I am looking for a clear cut anser but rather other ways to look at this issue.
Tomcat98
OAG
Thinks s/he gets paid by the post
Re: Military Survivor Benefit Plan (SBP)
Life Insurance at 70? I always felt you needed life insurance when you were YOUNG to take care of the family in case you did not come back or otherwise checked out early. You needed it then because you generally have less cash assets but as you age you build up cash assets which negates, to a large degree, the need for insurance. I could make a case for life insurance if you had a disabled child or children that would need care and could not provide for themselves -- but then I would not make a case for TERM. Maybe an Annuity (like full SBP; Child(ren)) or even ordinary life insurance to provide for the child(ren). Personally, I do have a small life insurance policy but it is paid up and no longer requires premium payments (it was paid up after 17 years of premiums), just enough to pay for a reasonable funeral.
Assuming you are military maybe you should check out AAAFMAA at www.aafmaa.com. They have some good policies.
Life Insurance at 70? I always felt you needed life insurance when you were YOUNG to take care of the family in case you did not come back or otherwise checked out early. You needed it then because you generally have less cash assets but as you age you build up cash assets which negates, to a large degree, the need for insurance. I could make a case for life insurance if you had a disabled child or children that would need care and could not provide for themselves -- but then I would not make a case for TERM. Maybe an Annuity (like full SBP; Child(ren)) or even ordinary life insurance to provide for the child(ren). Personally, I do have a small life insurance policy but it is paid up and no longer requires premium payments (it was paid up after 17 years of premiums), just enough to pay for a reasonable funeral.
Assuming you are military maybe you should check out AAAFMAA at www.aafmaa.com. They have some good policies.
In my mind I was just trying to find a potential comparison for SBP. I thought term might be a fit however the after 70 issues with potential uninsurability and expense may not make it a good comparison.
What you said about insurance at 70 does make sense. I do not really take into consideration other assets as this would be similar either with SBP or insurance. In my case I do have a child that may need some care or may take all our net worth for medical one day. I do want to make sure that my spouse will always have something. Maybe SBP is the way to go in my case.
Tomcat98
What you said about insurance at 70 does make sense. I do not really take into consideration other assets as this would be similar either with SBP or insurance. In my case I do have a child that may need some care or may take all our net worth for medical one day. I do want to make sure that my spouse will always have something. Maybe SBP is the way to go in my case.
Tomcat98
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