Why you should talk to your spouse about the VA death benefit before you retire

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If you are retiring from active service, one of the VA benefits you must make a decision about in your final days of service is the Survivor benefit plan, or SBP. This is a government benefit that you and your spouse must accept or decline together, in person, at the Pension Services Office during your final treatment. Organize this discussion together in advance and don’t be surprised.

Here are a few things you should know:

The SBP is essentially an insurance for your pension (not to be confused with the VGLI). Active duty members can purchase coverage upon retirement and members of the reserve component can choose coverage when they have 20 years of service eligible for retirement pay from the reserve. You pay a monthly premium which is depending on your pension. Conclusion: without SBP, your pension dies with you and your spouse receives nothing. With SBP, your spouse will continue to receive 55% of your pension until their death or remarriage until the age of 55. Here is a link to the DoD Actuary Page with a calculator tool to help you run the numbers.

Here is how it works:

Example: let’s say you’re an E7 retiring at age 20 (DFAS 2022 remuneration tables) with an annuity of $ 2,600 per month. The cost is $ 169.00 per month of premium (15.38% of your pension) and you contribute to it for 30 years (360 payments x 169.00 = $ 60,840). After 30 years, you are fully acquired and no longer have to pay premiums for your coverage. If your spouse survives you, he will receive the monthly pension of $ 1,430.00 (55% of $ 2,600) or $ 17,160 annually. It will take approximately 3.5 years to recover the premium of $ 60,840. Keep in mind that there are cost of living adjustments to the SBP annuity to ensure that it retains its value over the years.

If $ 17,160 per year (or whatever your annuity is calculated) isn’t even enough to cover your family’s needs, then the answer may be a combination of PAS and life insurance to fill the gap.

Group Service Member Life Insurance (SLGI) ends 120 days after your service, and you can get Group life insurance for veterans (VGLI) as a replacement, but remember that VGLI premiums increase every five years. If you are in relatively good health, you might find a better deal with private life insurance. I recommend considering this issue well before you file a disability claim with the VA, as a high disability rate can cause your premiums to increase or make you uninsurable.

Do you even need insurance? If you don’t have bills, don’t have children (or they’ve grown up), and you have substantial investments and savings, the answer might be no. But if you’re like most people with outstanding bills, a mortgage, car payments, kids in or nearing college, then you need to find something to replace your pension and other sources. income that depends on you being on the safe side of the grass. Part of the math in deciding whether to get or refuse SAP will weigh heavily on the likelihood that your spouse will survive you. Finances, age, fitness, genetics, and medical conditions for both of you should all be part of the equation.

SBP also has a plan (for around $ 5 per month) for your kids if something happens to you and your spouse. Your children would receive the pension (split between them) until your youngest child was 18 years old.

Do the math to see if SBP is right for you. Shop around for private insurance options as well – depending on your insurability, they may have better options to meet your needs. If your needs change and you want to cancel your SBP, you can only do so between 24 and 36 months. Otherwise (with a few other exceptions) it is a 30 year commitment.

“Over a sufficiently long timeline, everyone’s survival rate drops to zero.”

—Tyler Durden, Fight Club

We are all going to die at some point. Make sure to take care of your family in case the unthinkable happens. You owe them.

Kirk Windmueller is a retired Green Beret and Army veteran with over 22 years of service. He is a senior executive at Avantus Federal and a volunteer with Project Transition USA, a non-profit organization that teaches veterans how to use LinkedIn to network and find their next career. He lives in Fayetteville, North Carolina, with his wife and three children. If you have any questions for Kirk, email him at [email protected]

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