Editor’s note: This column has been corrected to reflect the origin of the benefit and the monthly percentage.

If you are retiring from active duty, one of the DoD benefits you must make a decision on in your last 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 Retirement Services Office during your final out-processing. Have this discussion together beforehand and don’t let it catch you by surprise.

Here are a few things you need to know:

SBP is basically insurance for your pension (not to be confused with VGLI). Active duty members can purchase coverage upon retirement and reserve component members can elect coverage when they have 20 years of qualifying service for reserve retired pay. You pay a monthly premium that is based on your pension. Bottom Line: without SBP, your pension dies with you and your spouse gets nothing. With SBP, your spouse will continue to get 55% of your pension until they die or remarry until age 55. Here’s a link to the DoD Actuary Page with a calculation tool to help you run the numbers.

Here’s how it works:

Example: Let’s say you are a E7 retiring at 20 years (2022 DFAS Pay Tables) with a $2,600 a month pension. The cost is $169.00 per month premium (6.5% of your pension) and you pay into this for 30 years (360 payments x 169.00 = $60,840). After 30 years, you are fully vested and no longer have to pay premiums for your coverage. If your spouse outlives you, they will draw the monthly annuity of $1,430.00 (55% of $2,600) or $17,160 annually. It will take ~3.5 years to earn back the $60,840 premium. Keep in mind that there are cost of living adjustments to the SBP annuity to ensure it retains its value over the years.

If $17,160 annually (or whatever your calculated annuity is) doesn’t even come close to covering your family’s needs, then the answer may be a combination of SBP and life insurance to cover the gap.

Servicemember’s Group Life Insurance (SLGI) ends 120 days after your service, and you can get Veteran’s Group Life Insurance (VGLI) as a replacement, but remember VGLI premiums go up every five years. If you are relatively healthy, you might find a better deal with private life insurance. I recommend looking into this well in advance of filing a disability claim with the VA as a high disability rating can cause your premiums to go up or make you uninsurable.

Do you even need insurance? If you have no bills, you don’t have kids (or they are grown) and you have substantial investments and savings then the answer might be no. But if you are like most people with bills to pay, a mortgage, car payments, kids in or approaching their college years, then you need to find something to replace your pension and other income streams that depend on you being on the right side of the grass. Part of the calculus of the decision to get or decline SBP will weigh heavily on the probability of your spouse outliving 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 about a $5 monthly fee) for your kids if something happens to both you and your spouse. Your kids would draw the annuity (split between them) until your youngest child turns 18.

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 this between 24-36 months. Otherwise (barring a few other exceptions) this is a 30-year commitment.

“On a long enough timeline, the survival rate for everyone drops to zero.”

—Tyler Durden, Fight Club

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

Kirk Windmueller is a retired Green Beret and Army veteran with over 22 years of service. He is a senior manager at Avantus Federal and a volunteer for 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, NC, with his wife and three kids. If you have questions for Kirk, email him at windmuellerk@gmail.com.

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