Photo By Elizabeth Caraway | FORT BELVOIR, Va. – Patty Cruz, Army Survivor Benefit Plan program manager, briefs...... read more read more
Are you prepared to make a decision about the Survivor Benefit Plan (SBP)?
As you decide, you should consider many different aspects of your family financial situation, such as employment, assets, debts, income, recurring expenses, etc. After considering those factors, will your household income and other assets after the loss of the income you provide (i.e. retired pay, VA compensation, salary if you plan to work) be sufficient to cover the expenses for your family? If not, are the retirement accounts enough to cover the expenses?
If the answer is no, how do you plan on replacing that lost income for your family in death? What is the best financial tool for you?
One question you may be asking yourself is:
What are the chances that my spouse will outlive me?
You never know when someone is going to die but the SBP Probability Tool (https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Factuary.defense.gov%2FPortals%2F15%2FSBP%2520Probability%25202022.xlsx&wdOrigin=BROWSELINK) considers the likelihood that your spouse will receive at least one month of the SBP annuity up to 30 years using military-specific mortality tables.
Want to know how long your spouse needs to receive an annuity before they get back everything you paid into the program? Take a look at the chart below:
Length of Time Premiums Paid.........Years of Annuity Received to exceed Premiums Paid
5 years.....................................................7 months
10 years..................................................1 year, 1 month
15 years..................................................1 year, 7 months
20 years ..................................................1 year, 11 months
25 years ..................................................2 years, 4 months
30 years ..................................................2 years, 8 months
In other words, if you pay the SBP premiums for 30 years, your spouse receives back everything you've paid into it within the first 2 years and 8 months!
You may be asking should I get SBP, life insurance or both? What’s the difference?
-SBP has monthly annuity payments. Term life insurance is typically a one-time lump sum.
-SBP annuity payments have COLA increases. Term life insurance payment does not increase with COLA.
-SBP offers spouse annuity payments for life if they do not remarry prior to age 55. Term life insurance is paid out only if death occurs during the fixed term.
You may find that you need both for different reasons. You may want to get life insurance to cover some big expenses up front and SBP to have continued monthly income that’s inflation protected that won’t run out. But if you decide you only want one, check out the SBP Insurance Tool (https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Factuary.defense.gov%2FPortals%2F15%2FSBP%2520Insurance%25202022.xlsx&wdOrigin=BROWSELINK to compare them. To best use the tool, figure out your SBP premiums using the SBP Premium Calculator (https://myarmybenefits.us.army.mil/Benefit-Calculators/SBP-Premium-Calculator) first so you can compare the value of SBP vs the life insurance using the same premium cost.
The SBP Insurance Tool will show you how long your spouse can expect the insurance payment to last. Remember, term life insurance is a one-time lump sum that does not have COLA increases, so the money will run out while the SBP monthly annuities continue with COLA increases. The question then becomes, when the life insurance money runs out, will your spouse be financially secure?
All the tools we referenced can be found on the MyArmyBenefits Calculator webpage (https://myarmybenefits.us.army.mil/Benefit-Calculators/SBP-Premium-Calculator) and the DoD Office of the Actuary webpage (https://actuary.defense.gov/Survivor-Benefit-Plans/).
If you would like to receive no-cost financial counseling services, go to the Office of Financial Readiness website to find a Personal Financial Counselor (https://finred.usalearning.gov/pfcMap).
| Date Taken: | 01.31.2023 |
| Date Posted: | 02.03.2023 15:18 |
| Story ID: | 437800 |
| Location: | ARLINGTON, VA, US |
| Web Views: | 554 |
| Downloads: | 0 |
This work, Planning Tools for your Survivor Benefit Plan Decision, by Patty Cruz, identified by DVIDS, must comply with the restrictions shown on https://www.dvidshub.net/about/copyright.
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