Thanks for letting me know about this thread, omni!
And Braumeister & Samclem, thanks again for the links.
Welcome to the forum, Aknowhow.
You have several choices, or legally your spouse has those choices:
1. Take all the SBP you can get for a premium of 6.5%/year until you're over 70 years old and have paid for 30 years, or
1.a. Take some SBP for a smaller premium, or
2. Take all the SBP you can get on the kid(s) until they turn 18-22 years old (
https://www.dfas.mil/retiredmilitary/provide/sbp/coverage.html), or
3. If you have a child who will be an "incapacitated or disabled adult" (DFAS' words), then take all the SBP you can get for their special needs trust, or
4. Decline SBP.
Let me make sure I understand your finances:
I'm going to extrapolate that you're 48 years old now and (as you've said in your post) your spouse is turning 50 this year. In other words, he's older than you and (since women statistically have a longer life expectancy) you're likely to outlive him. Admittedly I know nothing about the health of either of you or your VA disability rating after 30 years of service.
When you retire in four years, you'll have one child who's eight years old and another who's 18 years old. Their college expenses are probably adequately funded and your spouse (age 54 by then) would be working another 5-6 years. If you were to die the day after you retired, he'd probably only need a few years of childcare to cover his remaining working years.
It sounds as if you're forecasting a 2% withdrawal rate on an expected portfolio size of $1M beginning in 2028 or 2029. This is below the current dividend rate on the S&P500, which means that if you had a high-equity portfolio then you might not even need to touch the principal...
... and you have TSP funds as well...
... and you might not even have a mortgage.
Even if you did have a mortgage, and you died the day after you retired, he'd still have a $500K lump sum to pay off the mortgage.
There are millions of Americans raising young kids on less than $8K-$9K/month. Let's agree that even if you died the day after retirement with no SBP, in the worst case he'd pay off the mortgage and spend about 5%-6%/year of a ~$1.9M portfolio with room to cut some discretionary spending. And then around 2032 he could start withdrawing Social Security benefits on either his earnings record or yours.
It's hard to see why he would want the inflation-adjusted survivor annuity of 55% of your $84K/year pension. I doubt that he'd need any of it.
It's possible that you might decide to purchase SBP coverage on your kids through age 22.
And of course if your kids are considered "incapacitated or disabled adults" then you'd absolutely purchase as much SBP as you could for their SNT.
There are a couple of other considerations:
- You're much more likely to outlive him just on demographics, let alone on your family genetics. I guess you'd also keep an eye on your separation physical and your VA disability rating as well as on both of your healthy lifestyle habits. But right now it's hard to see why you'd want to insure your income if you'll outlive him.
- You already have adequate life insurance to cover your "income" (pension) from retirement to Social Security. Even that might be more than you need, and SBP would be overkill.
- At least one of you might sleep better at night knowing that you're spending 6.5% for an inflation-adjusted annuity. This is not a decision derived from cold-hearted actuarial financial logic. This is rooted in the emotions of behavioral financial psychology and is an equally valid basis for making a choice.
- Many spouses have sacrificed their careers (and earning potential) to follow the servicemember. Some of those spouses feel entitled to SBP as their reward for giving up a lifetime of human capital. This is also a decision based upon behavioral financial psychology. If you try to apply cold-hearted financial logic here then you're liable to find yourself tap-dancing in a marital minefield.
If you're not happy with the SBP seminar then I'm not going to inflict more blog posts on you. However I'd strongly recommend CFP Forrest Baumhover's book:
https://www.amazon.com/Military-Transitions-Guide-Survivor-Benefit-ebook/dp/B01EPB5H1Q/ref=sr_1_1
He's a retired Navy officer with his own CFP firm, and he writes a lot about these subjects at MilitaryInTransition.com. This $5 investment will give you and your spouse an objective analysis of SBP and term insurance. You'll be able to sort through the numbers and choose a basis for your decision.
My spouse and I are dual-military retirees, and I retired when our daughter was nine years old. My spouse and I each have our own income and assets, and we declined SBP on each other. We decided that we'd rather have the extra 6.5% to spend on ourselves while we're both still alive. As it turns out, our daughter wouldn't have needed the SBP coverage either.
