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Should You Enroll in the Survivor Benefit Plan?

Should You Enroll in the Survivor Benefit Plan?

February 08, 2023

As a military service member, you have access to a range of benefits that are designed to support you and your family in various ways. One of the most important benefits to consider is the Survivor Benefit Plan (SBP).

This plan is an important benefit for retirees and their families because it allows the retiree to provide a portion of their retired pay to their spouse and other dependents after their death. The SBP is designed to ensure that eligible family members still receive some financial support even after the retiree has passed away. It is a great way to safeguard the financial stability of a family after a retiree's death. Read on to understand what this plan entails and how to assess if it’s right for you and your situation as you prepare for retirement.

What Is the Survivor Benefit Plan?

Here are the details you need to know. The 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, there are different options within the plan that will determine how it works for each individual. For example, 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

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. It’s also important to remember that insurance and investments serve different needs. Even with the SBP, you still need a long-term investment strategy that will help you build wealth and take care of your family both while you’re here and when you pass. 

We Are Here to Help

As a veteran, it can be challenging to make the best decisions for your family, especially when it comes to finances. We understand this and we’re here to help. Our team of trusted professionals at 1on1 Financial has a deep understanding of the unique financial opportunities and obstacles veterans face. We would be honored to partner with you to help you make informed and confident decisions about your finances and work toward your goals. To get started, reach out by calling our office today at 909-981-1720 or simply click here to schedule a free 15-minute introductory phone call.

About 1on1 Financial

1on1 Financial is an independent financial advisory firm specializing in guiding working and retired professionals, executives, and business owners along the path to financial well-being. Founded in 1997, we use a team approach to help our clients accumulate wealth, generate income, preserve their life savings, and strategically plan for the distribution of their estate. With more than 50 years of combined experience in the financial services industry, we remain true to our fundamental mission: to provide personalized guidance, treatment, care, and service so our clients can gain control of their future and feel confident in their financial life.