Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Reserve Armed Forces pension choice
Old 08-12-2007, 01:21 PM   #1
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,645
Reserve Armed Forces pension choice

Hello, I'm looking for some feedback on the choice I need to make regarding my Reserve Armed forces pension survivor benefit plan.

I'm 41, I collect at age 60. Looks like I have three choices:
1) No coverage- if I die before 60 nobody gets any money.

2) Deferred coverage- If I die before age 60 my spouse/offspring get a reduced annuity at what would have been my 60th birthday.

3) Or immediate coverage, spouse and dependent children draw an immediate annuity upon my death.

Option 1 yields $660 a month. Deferred annuity yields $640 a month if I draw it, $363.25 a month if I die. Immediate annuity yields $626 a month at age 60, or $355 a month if I die before age 60.

I'm thinking option 3, which should reduce the amount of life insurance I need to carry too. Annuity pays for life of spouse, unless spouse remarries or dies before age 55. Then it pays to offspring until age 18, 22 if full time student.

What does $355 a month equate to if it were to replace a life insurance policy?

Thanks!
Bimmerbill is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-12-2007, 01:49 PM   #2
Thinks s/he gets paid by the post
OAG's Avatar
 
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
If you use the "traditional" 4% Capitalization it would be something like $335 X 12 = $4,020 (Annual Payout) Divided by .04 (or times 25 (the inverse)) = $100,500 for the capitalized value. This SPB payment will also be COLA'd (using the annual BLS CPI Number) both while you are alive and for the beneficiaries if you predecease them. So using these numbers IMO you could reduce your need for Life Insurance by about $100,000 (you would be buying Term Life Insurance, right?). Could you get Term for $100,000 for less than the SBP payment? However, as I am sure you are aware, SBP is a 30 year pay program after the 360th monthly premium it is fully paid up and no further premiums are required continue coverage.
__________________
Vietnam Veteran, CW4 USA, Retired 1979
OAG is offline   Reply With Quote
Old 08-12-2007, 02:12 PM   #3
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,645
Yeah, I am looking at some term life to replace my SGLI. I didn't know SBP has a 30 year pay plan. I'll have to reread my info.
Bimmerbill is offline   Reply With Quote
Old 08-13-2007, 12:11 AM   #4
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,855
Quote:
Originally Posted by Bimmerbill View Post
I'm 41, I collect at age 60. Looks like I have three choices:
1) No coverage- if I die before 60 nobody gets any money.
2) Deferred coverage- If I die before age 60 my spouse/offspring get a reduced annuity at what would have been my 60th birthday.
3) Or immediate coverage, spouse and dependent children draw an immediate annuity upon my death.

Option 1 yields $660 a month. Deferred annuity yields $640 a month if I draw it, $363.25 a month if I die. Immediate annuity yields $626 a month at age 60, or $355 a month if I die before age 60.

I'm thinking option 3, which should reduce the amount of life insurance I need to carry too. Annuity pays for life of spouse, unless spouse remarries or dies before age 55. Then it pays to offspring until age 18, 22 if full time student.
Up until a couple years ago, Reservists used to file for retirement in their 40s ("go gray") and select their SBP option "just in case". Then when they hit 60 they'd cancel their SBP.

SBP staff wised up to this practice. Today you can still cancel your SBP after reaching age 62, but you have to pay two years of premiums ("payback" for the coverage from ages 41 to 60) before being eligible to canx. It's hypothetically possible that at age 60 you'll no longer feel the need for SBP, so this is one option.

Here's another thought. If you choose option 2, your spouse has to wait until age 60 before being able to collect your SBP. However, like a Reserve pension or SS, they'd know that another stream of cash would start up at a certain age and they'd be able to spend down their savings now in anticipation of that future cashflow. But I don't know if the savings is worth the delay.

Spouse has a membership in the Naval Reserve Association ("the other NRA") with tremendous archives on the arcane details of programs like this. (PM me an e-mail address and I'll send you their PowerPoint brief.) If your service has a similar organization then it's worth joining and poking around their membership side to see what other info they have.

Mods, .ppt files aren't one of the authorized attachments. If you can add that authorization then I'll post the brief here for any interested Reservists/NG. But I understand if it's a macro/security issue.
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Old 08-14-2007, 02:41 PM   #5
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,855
Quote:
Originally Posted by Bimmerbill View Post
Yeah, I am looking at some term life to replace my SGLI. I didn't know SBP has a 30 year pay plan. I'll have to reread my info.
Just to beat this to death, here's a Military.com article (Military Report - Premium Change for Some Retirees):
"Participants in the Uniformed Services Survivor Benefit Plan for retired military members face some changes. Effective Oct. 1, 2008, SBP participants who reach 70 years of age and have made 360 payments (30 years), will no longer have to pay premiums for continued SBP coverage and will be placed in "Paid-up SBP" status. Also, there will be a paid-up status for participants in the Retired Serviceman's Family Protection Plan once they reach 70 years of age. No action is required of SBP participants to be placed in Paid-up SBP status. More information on Paid-up SBP should be available at the DFAS website within the next several months."
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Old 08-15-2007, 10:57 AM   #6
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 377
Make sure you file at the VA also, even if they rate something at 0% you will become eligible for VGLI, which is some pretty cheap life insurance, it rises as you get older, but could cover you pretty cheaply until 62.
Bigritchie is offline   Reply With Quote
Old 08-18-2007, 05:47 AM   #7
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,645
I have the option of switching my SGLI to VGLI right now, within 90 days of my retirement. I can get a term plan cheaper tho since I am still relatively young and healthy.
Bimmerbill is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
State residency for Armed Forces personnels for in-state college tuition. Sam Other topics 9 07-30-2007 05:06 PM
Military pension and pay - how much is it past 20 Average Joe FIRE and Money 13 03-18-2007 10:22 AM
Traditional Pension being frozen by megacorp murg FIRE and Money 16 03-15-2007 10:41 AM
Pension Time Bomb Article Mountain_Mike FIRE and Money 11 01-17-2006 06:49 AM
The Fat Pension newellcr Young Dreamers 34 07-26-2005 08:23 AM

» Quick Links

 
All times are GMT -6. The time now is 11:28 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.