Is the Survivor Benefit Plan right for you and your family?

By Patty Cruz, Army Survivor Benefit Plan Program Manager

Are you researching whether you need the Survivor Benefit Plan (SBP) or the Reserve Component Survivor Benefit Plan (RCSBP)? Are you trying to figure out if you should get life insurance instead? Then keep reading…

You’ll see many tools that compare the SBP to life insurance, however, they are different tools with different roles to play in your family’s financial stability. SBP is a monthly annuity, so it is more of an income replacement. It is inflation protected meaning that the monthly annuity that your survivor would receive has cost of living adjustments just like your retired pay would have.

Let’s take a step-by-step approach on making this decision:

  1. Define your goals – This is different for everyone. Here are some of the common ones:
  • Provide financial stability for my family until they die
  • Making sure my children will be provided for until they turn 18 or finish college
  • I just need to make sure that my spouse has enough money to pay the mortgage so they can stay in the house after I die
  1. Gather key pieces of information about your family’s financial situation – This again is different for everyone.
  • What is your household income and what contributes to that?
    • Your future salary if you plan on working after retirement
    • Your retired pay
    • Your disability compensation
    • Your spouse’s income
  • What are your family’s assets?
    • Retirement Accounts (TSP, 401k, 403b)
    • Brokerage Account
    • 529 plan
    • Savings accounts
    • Checking accounts
    • Real Estate (Equity)
  • What are your household expenses?
    • Mortgage
    • Car payment
    • Groceries
    • Travel
    • Student Loans
    • Utilities
    • Cell phone
  1. Analyze your family’s financial picture. Can your family cover the expenses without your portion of the household income? This includes your retired pay and any disability compensation from the VA. If you plan on working after retirement, it also includes your salary. These would all stop when you die. If the answer is no or the margins make you nervous then it’s time to do some research.
  1. Research all the available financial tools that can cover the gap. This includes SBP and life insurance. A word of caution, before you say SBP won’t work and that life insurance works better, make sure you are insurable, and the premium you think you will be charged is what they will actually charge. Initial searches will give you a range of premiums and may not be your actual.
  1. Decide for yourself what your family needs based on your financial picture and goals, not someone else’s. For some, SBP is the right decision, for others it’s life insurance, and in other cases, both might be what they need. At the end of the day, it is YOUR decision, so make an informed one.

Check out these tools on the DoD Actuary page:

  1. SBP Probability Tool – What’s the probability that your spouse will outlive you? Keep in mind that the federal government will pay your spouse the inflation-protected SBP annuity until he or she dies or until he or she remarries prior to age 55. Cost of living adjustments to the SBP annuity ensure the value of SBP today will be the same in the future. Unlike SBP, life insurance runs out, and because of inflation, its value will be less in tomorrow’s dollars. 
  1. SBP Insurance Tool – To figure out how much life insurance your family will need, you must figure out the amount of income your spouse will require over the course of his or her expected life and then factor in the future inflation rates. You can determine the amount of life insurance you would need to replace the value of your SBP by using the SBP Insurance Tool on the DoD Actuary website. When looking at different life insurance products, you must also consider the effect of your age and any medical conditions on your life insurance premiums. 

You won’t know when you will die, but it’s up to you and your family to plan for when it happens. Have the discussion with your spouse about your current financial situation and your future. Each family’s circumstances are different and determining your specific needs can be complicated. Talk to a Department of Defense Personal Financial Counselor for free. Identify the gaps in your plan, if any, and make a decision about whether SBP, life insurance, or both is the right fit for your financial plan. For specifics on how SBP works, contact your Retirement Services Officer.

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