CH 61, VA offset, and

[ServiceB4Self]

Please advise.

Please see pay below.

Ch 61 pay: $5,767
VA offset: $4631

My question is, will SBP payment be based off of 6.5% the original $5,767, or based off the the remaining pay after VA offset ($5,767 - $4631 = $1136).

Would my SBP be $5,767 x 0.065 = $374.85 or
Would my SBP be $1136 x 0.065 = $73.84?

 

[RonG]

Please advise.

Please see pay below.

Ch 61 pay: $5,767
VA offset: $4631

My question is, will SBP payment be based off of 6.5% the original $5,767, or based off the the remaining pay after VA offset ($5,767 - $4631 = $1136).

Would my SBP be $5,767 x 0.065 = $374.85 or
Would my SBP be $1136 x 0.065 = $73.84?

The SBP premiums and benefits depend on what is referred to as the "base amount". The base amount is the dollar amount of coverage that is elected. The base amount can be any amount ranging from $300 to the full amount of the member's retired pay (or in the case of a member who retires under REDUX, the retired pay the member would have received if under the high-three retirement system). Full coverage means that the full retired pay is the base amount. The base amount is tied to retired pay. When retired pay is adjusted due to a Cost-of-Living Adjustment, or COLA, the base amount is adjusted, and as a result, the premium and amount of the annuity increase.

Opinion since we declined the SBP: It will be based on the entire retirement pay without consideration of the offset.

Ron

 

[Provis]

Please advise.

Please see pay below.

Ch 61 pay: $5,767
VA offset: $4631

My question is, will SBP payment be based off of 6.5% the original $5,767, or based off the the remaining pay after VA offset ($5,767 - $4631 = $1136).

Would my SBP be $5,767 x 0.065 = $374.85 or
Would my SBP be $1136 x 0.065 = $73.84?

Just a tip but if you have adequate coverage for example a life insurance policy you don't have to do SBP. Also, there is a low cost option too. That is what we chose. The rate of the low cost option is 2.5% instead of 6.5% . The coverage is low so you can only get up to 2.5% cost up to the threshold amount which for 2023 = $961 so 55% of that = $528.55 for only $24.03 cents per month. See the annual COLO memo numbered 8 & 9 from memo link here: https://militarypay.defense.gov/Portals/3/Documents/Reports/2023 Retired COLA Memo Signed.pdf?ver=oczFRe1_mvwm1j-RqRCUnA==

My wife has a 7 figure 30 year term life insurance policy that was in place several years ago as a place holder for when she retired to lean on that instead of the crazy high SBP pricing but the low cost SBP option is a good deal so we did that too. Her term life policy monthly cost was only $112 a month.

 

[cullenrp]

Ironically, I’m in the early phases of going through the DES, and am a financial planner in my civilian career. I work with a number of military retirees and have tried to crack the code on the SBP because I agree, it’s a rip off. The issue I keep running in to us that the problem we typically have to solve for is the full disability of the veteran/retiree who, based on earnings capacity, may not be able to accumulate enough in investments to offset any need for SBP. Specifically, if a disability is so severe that it prevents the primary income earner from working but does not lead to premature death, then the SBP provides very little benefit. The earner needs a disability policy more than anything. If the veteran/retiree is able to be gainfully employed, then the benefit from SBP can be monetized to an equivalent net present value calculation which would be funded by saving and investing in retirement or after tax investments.

 

[Provis]

Ironically, I’m in the early phases of going through the DES, and am a financial planner in my civilian career. I work with a number of military retirees and have tried to crack the code on the SBP because I agree, it’s a rip off. The issue I keep running in to us that the problem we typically have to solve for is the full disability of the veteran/retiree who, based on earnings capacity, may not be able to accumulate enough in investments to offset any need for SBP. Specifically, if a disability is so severe that it prevents the primary income earner from working but does not lead to premature death, then the SBP provides very little benefit. The earner needs a disability policy more than anything. If the veteran/retiree is able to be gainfully employed, then the benefit from SBP can be monetized to an equivalent net present value calculation which would be funded by saving and investing in retirement or after tax investments.

That's why I am a strong advocate of getting a 30 year term life policy while you are still healthy. That is a way to reach that goal without getting all the way there. My wife pays $112 a month instead of $392 per month for SBP. By the time the term policy is up both my wife and I will be at retirement age. Also, if I want to build wealth from a nest egg standpoint I can invest the difference! Investing the difference would net you about 300k to 400k in a roth account via making a $280 a month roth contributions in low cost index funds.

 

[ServiceB4Self]

Thanks for the replies and insight, unfortunately I had already signed up for the SBP when I was on my way out. I believe there is a chance to change it at the 2 year mark, so may have to reconsider at that time. Additionally, I am currently uninsurable, at least at a decent rate do to congestive heart failure. I do still have about 10 years left of a 7 figure term insurance plan.