If you are medically retired with a 90-100% permanent combat related disability, is it necessary to pay the premium for SBP annuity? Doesn't the spouse receive a stipend for surviviors benefits from VA? Does anyone have a clue what the premium would be for a SGT E 5 with 7 years experience? Thanks.
SBP Necessary if have 100% Medical Retirement Disability?
- Thread starter soldieradvocate
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DFAS explains the SBP at https://www.dfas.mil/retiredmilitary/provide/sbp/ <---LINK
You can decline SBP (I did) but your spouse must sign the same document that shows your election.
Ron
You can decline SBP (I did) but your spouse must sign the same document that shows your election.
Ron
Spouse stipend from the VA after you die is called DIC. It’s NOT automatic!!! You must meet the criteria:
You may be eligible for VA benefits or compensation for surviving spouses if you meet the requirements listed below. You’ll also need to provide evidence with your claim showing that one of the descriptions below is true for the Veteran or service member. Evidence may include documents like military service records, doctor’s reports, and medical test results.
One of these must be true. You:
You’ll also need to provide evidence showing that one of these descriptions is true for the Veteran or service member:
You may be eligible for VA benefits or compensation for surviving spouses if you meet the requirements listed below. You’ll also need to provide evidence with your claim showing that one of the descriptions below is true for the Veteran or service member. Evidence may include documents like military service records, doctor’s reports, and medical test results.
One of these must be true. You:
- Married the Veteran or service member before January 1, 1957, or
- Married the Veteran or service member within 15 years of their discharge from the period of military service during which the qualifying illness or injury started or got worse, or
- Were married to the Veteran or service member for at least 1 year, or
- Had a child with the Veteran or service member, aren’t currently remarried, and either lived with the Veteran or service member without a break until their death or, if separated, weren’t at fault for the separation
You’ll also need to provide evidence showing that one of these descriptions is true for the Veteran or service member:
- The service member died while on active duty, active duty for training, or inactive-duty training, or
- The Veteran died from a service-connected illness or injury, or
- The Veteran didn’t die from a service-connected illness or injury, but was eligible to receive VA compensation for a service-connected disability rated as totally disabling for a certain period of time
- For at least 10 years before their death, or
- Since their release from active duty and for at least 5 years immediately before their death, or
- For at least 1 year before their death if they were a former prisoner of war who died after September 30, 1999
SBP is pretty expensive, I am going to retire at 38, if I pass in my late 50's early 60's I would have paid almost $300 a month for 25 or so odd years for my wife to get half my pension for 10-15 years, the longer I live the worse the deal is for my family. I am not comfortable with literally gambling on my life span.
Look at SBP this way, you are putting money down every month that you will die soon and your spouse lives long enough to recover your costs. Or you could put your own money away in savings and investments, live a long healthy life and your heir gets a decent sum with no stipulations other than your will. This plan makes me feel better and I would rather bet on me living long and investing, than literally investing in my death.
Now the caveat is I don't not have any life shortening disabilities, if one of your condition is life threatening or life shortening then you would actually be investing in your family due to your lower life expectancy, to that scenario I would say its worth investing in leaving your family your pension after you pass.
This is all from the layman, I am in no way a financial planner or accountant. This is just how I sold my self against the SBP. Please look into it further for your own expectancies.
Look at SBP this way, you are putting money down every month that you will die soon and your spouse lives long enough to recover your costs. Or you could put your own money away in savings and investments, live a long healthy life and your heir gets a decent sum with no stipulations other than your will. This plan makes me feel better and I would rather bet on me living long and investing, than literally investing in my death.
Now the caveat is I don't not have any life shortening disabilities, if one of your condition is life threatening or life shortening then you would actually be investing in your family due to your lower life expectancy, to that scenario I would say its worth investing in leaving your family your pension after you pass.
This is all from the layman, I am in no way a financial planner or accountant. This is just how I sold my self against the SBP. Please look into it further for your own expectancies.
BLUF: SBP "Looks" expensive but it's pre-tax dollars, which makes it actually cheaper. In many cases because of the cause of the medical discharge it's likely cheaper than equivalent life insurance if you can even qualify. Plus it's attached to COLA and grows with inflation, Life insurance policies do not.
SBP may be expensive, but your spouse gets 1/2 of your retirement entitlement for rest of their lives. Also you no longer pay SBP when you are both 70 yr/old & 30 yrs of SBP. When you got your SBP brief they "should" have given you a table that shows how long your spouse has to out live you to have "made up" the money lost in paying for it. It's surprisingly short time period.
Also if you're medically retired you may be required to disclose that on Life Insurance and you may not qualify, or it may be similar price for less benefit or possibly more expensive. VGLI is blatant theft and horrible life insurance (financially). So IF you are doing life insurance for your family, you should do a cost analysis of SBP now for 30 yrs, that pays 50% your retirement for life of spouse. Vs Term life that will just be money loss if you don't die soon enough, and drastically more expensive in 20 yrs to renew when you're older with more health issues. Or a Full life, which is even more expsenive.
We elected to do SBP, because no matter how we sliced it with the legally required disclosures on Life insurance applications (for the medical discharge and existing conditions) we just flat couldnt find a better deal.
Lastly, SBP is paid PRE-Taxes, so you are lowering your effective tax bracket by using it (similar to TSP) and so the cost is not the real amount of income lost. You'd need to add that amount back in and then calculate your taxes to see how much you'r "really Paying" (i.e. if your SBP $250 a month before taxes, and you kept that $20 your taxes would go up accordingly and you'd pay minimum $25 or more depending on your employment back to the government in taxes anyways, so SBP is "really" only costing you $225, or even less if your still employed).
TL ; DR - Talk to tax preparer about pre-tax effects, shop for life insurance of equal amount for longevity, compare numbers. SBP very possibly the better deal.
SBP may be expensive, but your spouse gets 1/2 of your retirement entitlement for rest of their lives. Also you no longer pay SBP when you are both 70 yr/old & 30 yrs of SBP. When you got your SBP brief they "should" have given you a table that shows how long your spouse has to out live you to have "made up" the money lost in paying for it. It's surprisingly short time period.
Also if you're medically retired you may be required to disclose that on Life Insurance and you may not qualify, or it may be similar price for less benefit or possibly more expensive. VGLI is blatant theft and horrible life insurance (financially). So IF you are doing life insurance for your family, you should do a cost analysis of SBP now for 30 yrs, that pays 50% your retirement for life of spouse. Vs Term life that will just be money loss if you don't die soon enough, and drastically more expensive in 20 yrs to renew when you're older with more health issues. Or a Full life, which is even more expsenive.
We elected to do SBP, because no matter how we sliced it with the legally required disclosures on Life insurance applications (for the medical discharge and existing conditions) we just flat couldnt find a better deal.
Lastly, SBP is paid PRE-Taxes, so you are lowering your effective tax bracket by using it (similar to TSP) and so the cost is not the real amount of income lost. You'd need to add that amount back in and then calculate your taxes to see how much you'r "really Paying" (i.e. if your SBP $250 a month before taxes, and you kept that $20 your taxes would go up accordingly and you'd pay minimum $25 or more depending on your employment back to the government in taxes anyways, so SBP is "really" only costing you $225, or even less if your still employed).
TL ; DR - Talk to tax preparer about pre-tax effects, shop for life insurance of equal amount for longevity, compare numbers. SBP very possibly the better deal.
We ended up taking the child onlynplan for SBP. It was 3 bucks a month and if I were to die within the next 15 years, it would provide my wife with support until the kids move out (7 and 5 year old). It’s basically a super cheap term policy with a minimal payout window.
I do plan on taking the VGLI when I first get out because I don’t believe I will get any good rates for a term policy with my medical conditions. Since I am 34, the costs aren’t insane for thenext 5-10 years. After this, we plan on either lowering the payout to reduce costs, cancel it altogether, or switch to an employer insurance benefit.
Ultimately, we are pretty good savers and we believe in the next 10-15 years we would have enough saved up to self insure our deaths.
I do plan on taking the VGLI when I first get out because I don’t believe I will get any good rates for a term policy with my medical conditions. Since I am 34, the costs aren’t insane for thenext 5-10 years. After this, we plan on either lowering the payout to reduce costs, cancel it altogether, or switch to an employer insurance benefit.
Ultimately, we are pretty good savers and we believe in the next 10-15 years we would have enough saved up to self insure our deaths.
Related.
Due to my family history, I "bet" I would die early and bought term life insurance. It was $500,000 initially.
Forty years later, I have lost that bet (and I am pleased of course).
Value of those term policies today: $20,000
Each person has their own concerns and medical considerations. If I had to do it over, I would make the same choice. There were other personal considerations that led me to that choice and I ended up being a single parent.
Ron
Due to my family history, I "bet" I would die early and bought term life insurance. It was $500,000 initially.
Forty years later, I have lost that bet (and I am pleased of course).
Value of those term policies today: $20,000
Each person has their own concerns and medical considerations. If I had to do it over, I would make the same choice. There were other personal considerations that led me to that choice and I ended up being a single parent.
Ron
You can see at least 3 different people with 3 different choices, with 3 different outcomes.
The most important thing is that you do some research on financial costs, and the coverage provided, and then choose what works best your your specifics family and situation. The right answer for you is just that, the right answer for you, not anyone else.
If you're unsure you can sign up for SBP and withdrawal during a specific time (I think it's 3 yrs). While the law allows SBP to have a enrollment season, my under standing is it's only ever been done once. So if you elect not to do it, you should consider it as a permanent choice.
It depends on lots of variable. DIC is great if you spouse will qualify. But the amount you get for DIC, may not do far in replacing the income lost when the member dies.
It depends on how you planned it if you failed to sign up for VGLI within 120 days post service your kinda screwed as VGLI waives the proof of good health under this strict rule. In my case I signed up for VGLI and it was only 40 bucks for 400k VGLI gets quite expensive in your late 50s and up. The plan was to only have the VGLI coverage for me to meet the 10 year P&T rule to qualify fo DIC meaning no matter when I died my spouse would be covered.
In no way whatsoever was SBP competitive for 300 bucks a month. Failing to opt in to VGLI within 120 days post service is major estate planning mistake especially for medical retirees.
In no way whatsoever was SBP competitive for 300 bucks a month. Failing to opt in to VGLI within 120 days post service is major estate planning mistake especially for medical retirees.
Just want to put my 2 cents in here. Before my wife had health issues I got a 30 year term life insurance policy on her for 2 million for only $100 a month. Chances are I will die first and most of the SBP stuff is based on actuaries for men in the military and not women. I calculated her SBP payment to be a tad over $300 a month since she would retire as a Major. Getting a long term policy locked in is another way to insure income at a lower cost especially if all you want it for is to cover you while the kids are young.
Hello,
I did the same. I bet I would die young and lost...75 in December.
Each case is different. I was more interested in the welfare of my son than his mother. My son was the beneficiary. Of course, my now ex-wife after 25 years (divorce) had to sign off/agree to the SBP decision.
Again...situations differ.
Fortunately, I have been able to gift my son a significant amount over the past five years.
Ron