Thanks for the reply. Right now she gets about 21k a year pre-tax on her retired Army pay and another 15k from VA disability. The SS statement that we reviewed the other day said that if I died today she would get about $2200.00 per month plus what the kids would get. All of that is if we didn't have any SBP at all. If I sign up for full SBP, it would provide in today's amount about $4805.00 per month pre-tax in addition to that.
To be excruciatingly technically correct,
you're not signing up for anything. The SBP decision on your pension is made by your spouse. But let's presume that you guys agree on your insurance strategy.
Just to make this more complicated, a few months back Htown Harry brought my attention to the nasty little unintended consequence of the SBP-DIC offset:
Quadrennial Review of Military Compensation
As a separate issue, you're going to have to check my memory on this, but I believe that DIC is only paid if your death is service-connected. If you die on active duty then it's probably considered service connected. If you get hit by a school bus on your first 10 minutes of terminal leave then that may not be considered service-connected. Of course the services have a lot of discretion on this and it may depend on the determination of the investigating officer. SBP, however, will pay out for anything short of spousicide.
A couple years ago a dual-military retiree couple asked Suze Orman how they were doing. She gave them holy hell when she found out that they'd turned down SBP in favor of term insurance:
Suze Orman advises a dual-military couple
However the couple made a very rational decision to only cover their insurance between the age they retired and the age that they'd start Social Security. They didn't have a financial need for SBP to cover either one's expenses for the rest of their lives, so they didn't want to possibly pay 30 years of SBP premiums for just the few years that they actually needed some coverage.
Before your spouse turns down SBP she'd want to make very sure that her expenses are covered not only for herself but also for your kids' college funds. Do either of you want to leave an inheritance for the kids, or send the grandkids to college? Would her disability conditions affect her longevity or her medical expenses? Would she need to make extensive home modifications for access & mobility? What if Tricare premiums go up 100% over the next decade (as seems possible)?
Before she decides to cover the gap with term life insurance you'd need some sort of reasonable estimate of the premium expenses. You'd probably be looking at a physical exam that would be more comprehensive than the typical retirement physical. If you're borderline on blood pressure or cholesterol or stress-related issues (that will probably get better in retirement) then SBP may actually be a lot cheaper than VGLI or other term insurance, assuming you need the term insurance.
My spouse and I faced a similar decision with our retirements-- we declined SBP on each other and we also skipped the term life insurance. We feel that we have "enough" for our lifestyle. We'd rather have the $2600/year to spend on each other now rather than to be rich in widowhood.
While you're reviewing the fine print, the Air Force also put out an extraordinarily detailed SBP brief in 2011 that includes the details for minor children:
More SBP details
If the Army has given you a better/more recent SBP presentation then let me know where to download it, and I'll add it to the blog.