By Christopher Flis, CFP®
Military service members approaching retirement have important decisions to make regarding their benefits. After years of service, Veterans are entitled to military retired pay that lasts their lifetime, and in some cases their spouse’s as well.
Unfortunately, retired pay is one of the benefits that ends upon the death of the Retiree. Therefore, considering the impact a Retiree’s death has on family members is of utmost importance. Fortunately, some benefits can survive the Retiree’s death. The Survivor Benefit Plan is one such benefit.
What Is The Survivor Benefit Plan?
The Survivor Benefit Plan (SBP) offers monthly income of up to 55% of your retired pay to your dependents in the event of your death. SBP is essentially an annuity payable to your designated beneficiary. In most cases, SBP is relatively inexpensive compared to private life insurance products. Of course, each individual is different. While SBP typically provides income to your spouse, it can do the same for your children or others in some instances.
To enroll for the SBP, a participant agrees to pay a portion of his/her retired income toward the premiums. The most common payment is 6.5% of your retired income per month, which results in the maximum benefit of 55% of your base retired pay. A critical point here is that SBP premium payments are pre-tax. Moreover, premiums are only paid for 30 years, after which you are considered “paid up” and no more premiums are required while the 55% income benefit is still provided upon the Retiree’s passing.
If your family elects for a lower benefit amount (to a minimum of $300), the premiums decrease. If you add qualified dependents on the plan along with your spouse, the premiums will increase. More specific information regarding the costs of premiums can be found here.
Survivor Benefit Plan Options
Participating Veterans have options to select who will receive the benefit should they pass away. Typically, spouses are the primary concern; however, several variations of “family” exist. Therefore, both at retirement and at life’s inflection points (namely divorce, the death of a spouse, or the birth of a child), reviewing your SBP options is strongly recommended. Fortunately, Resilient Asset Management maintains strong contact with the Military’s SBP Specialists, so arranging a conference call is a very, very simple matter.
Is The Survivor Benefit Plan Right For You?
The SBP offers an affordable income source that provides peace of mind for many military families. The benefit payments are protected against inflation and are adjusted every December based on the Consumer Price Index. There are no health exams or other qualifying requirements to participate.
While SBP provides a bevy of benefits, it isn’t necessarily right for everyone. For example, if a Retiree’s spouse is considerably older or is in ill health, SBP may not be needed. Moreover, if you have long-held permanent life insurance, then maintaining that policy may be advisable. In short, there is no one-size-fits-all advice for Retirees.
To make the best decision for your family, it helps to receive an objective opinion about your unique circumstances from a trusted professional. Namely, you can partner with a financial expert like the team at Resilient Asset Management. And doing so prior to retirement is advisable since SBP elections are exceptionally difficult to undo. A Veteran himself, founder Christopher Flis specializes in advising military service members as they progress through their final active-duty years and into retirement. Schedule a 30-minute introductory meeting or contact us at firstname.lastname@example.org or (901) 318-3423.
Christopher Flis is founder and financial planner at Resilient Asset Management, a fee-only Registered Investment Advisor (RIA) based in Tennessee. Chris graduated from the United States Naval Academy with a bachelor’s degree in computer science, earned a Master of Science in Computer Science from the University of Minnesota, and attended flight school in Pensacola, FL, launching a fulfilling and distinguished military career. Chris spent 20 years in the Navy as an F/A-18 Strike Fighter Pilot, which included tours in Japan, Australia, and California, combat missions in all areas of the Persian Gulf and Afghanistan, and time spent as the Executive Officer of Naval Base Guam and Director of Navy Casualty in Millington, TN. When Christopher was ready to make a career change, he turned to a passion he held since high school when he attended a lecture on personal finance and started managing his own investments. He earned his Certified Financial PlannerTM (CFP®) designation and now combines his passions and experience by serving military, retired military, business owners, and retirees. Chris provides comprehensive, customized financial services, helping his clients overcome their challenges and take opportunities so they can achieve financial independence.Chris lives in Downtown Memphis with his wife, Christine, and his son, Emerson. He is an avid runner and when he is not jogging for exercise, he is usually chasing his son around or walking his 3 dogs. To learn more about Chris, connect with him on LinkedIn.