Quote History Quoted:
Years ago I went to Career Counselor school. We had a VA guy come talk about benefits. He mentioned that when you retire from active duty your pay isn't technically "retirement." I forget what he called it, but he said that your actual "retirement" comes at age 60.
The way he explained it, if you decline SBP at your end of service, you get one last chance to apply for it when you turn 60.
Please don't take my word on this. It is worth the time to call the DFAS people and talk to an actual SBP expert.
Don't forget that we are talking about your spouse getting your pension after you die, which is different from life insurance. Your life insurance should be at least 10 times your net income. The philosophy is that if it's invested wisely and earns 10% interest, then you effectively replace your income with that interest. This should sustain your spouse/family in addition to your SBP pension benefit.
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Retainer pay is what it truly is because we can be called back. If you die you can't be called back so it ends.
The problem with SBP is you're going to pay 6.5% of your monthly retired pay to get only 55% of your monthly retired pay to your spouse if you die.
Most can do way better with a big lump sum insurance policy that costs less monthly then SBP does.
Let's say your retired pay is $3000 so full SBP for spouse would cost $195 a month to get your spouse a payment of $1650 per month if you die.
Now let's say you purchase $500,000 term life at $195 per month (just for ease of comparison, realistically most would pay much less).
Term pays out lump sum $500,000 immediately upon your death.
SBP pays out $1650 per month upon your death and 25 years later (if they live that long) your spouse will finally reach $500,000.
$500,000 lump can pay off a mortgage, or cars, put kids through college or provide the same $1650 per month for 25 years while making some modest interest in a safe secure investment. It gives your family way more options.
$1650 month isn't paying off anything immediately except maybe part of your spouses monthly bills.
Full SBP for kids is a few dollars a month to get the same $1650 a month until they are 18 or 22 if they are full time students.
Everyone's circumstances are different so crunch the numbers and if you go with life insurance make sure the policy is active before you have to decide to take SBP or not.
Whatever you do make sure your family is taken care of if you pass.