Military Retirement and the Survivor Benefit Plan
When you retire from military service after 20 or more years, you will need to make decisions about your future and the future of your family. Military retirement benefits end upon the death of the retiree unless the retiree enrolled in the Survivor Benefit Plan.
What is the Survivor Benefit Plan?
At retirement, you have the option of enrolling in a Survivor Benefit Plan (SPB). A SBP provides a monthly income, also known as an annuity income, to beneficiaries in the event of your death. This income is not fixed, it is adjusted annually for inflation.
For more information about the Survivor Benefit Plan, Click Here.
How is the amount of your annuity decided?
The survivor annuity is determined by the “base amount” you choose. You can choose a base amount from $300 to full retired pay. The maximum amount a SBP beneficiary can receive is 55% of the base amount. For instance, if you use your full retirement pay as your base, it will be 55% of your full retirement pay.
What do the premiums cost?
The premiums to cover your spouse are 6.5% of the base amount you choose. If you choose the minimum base amount (threshold amount), the premium will be 2.5% of the first $725, plus 10% of the remaining base amount.
What keeps the premiums lower in a Survivor Benefit Plan compared to other annuities?
You are required to pay premiums for the SBP, but there are several things that keep the premiums far lower than annuities you can purchase from a private insurance carrier.
- Your premiums are paid with pretax dollars. When an item is paid with pretax dollars, it serves to lower your taxable income.
- Example: Your gross monthly benefit is $100 per month. Your taxable income from retirement benefits will be $900 rather than the full $1000.
- The federal government pays all the costs to administer the plan plus a percentage of the premiums.
- The benefit is adjusted periodically for cost-of-living changes
The survivor annuity is determined by the “base amount” you choose. You can choose a base amount from $300 to full retired pay. The maximum amount a SBP beneficiary can receive is 55% of the base amount. If you use your full retirement pay as your base, it will be 55% of your full retirement pay.
For more information about the Survivor Benefit Plan, Click Here.
What keeps the premiums lower in a Survivor Benefit Plan compared to other annuities?
You are required to pay premiums for the SBP, but there are several things that keep the premiums far lower than annuities you can purchase from a private insurance carrier.
- Current Spouse - If you ar emarried when you retire, you can choose to list your spouse as a beneficiary.
- Future Spouse - If you get married after you retire, you can enroll your new spouse in the SBP, but the two of you must be married at least one year before your death for the new spouse to be eligible for benefits.
- Former Spouse - You can also cover a former spouse with a SBP. If you have more than one former spouse, you must decide between them. You can cover only one former spouse.
- Children - Children are eligible for SBP coverage until they reach age 18 or, if a full time, unmarried student, age 22. Children who are mentally or physically disabled and unable to support themselves remain eligible for benefits so long as they are unmarried.
- Dependents - If you have a disabled dependent, you can contribute your SBP payments to a Special Needs Trust. A Special Needs Trust is a trust designed specifically for mentally or physically disabled people.
If your spouse dies and your children are still minors, the SBP will be transferred to them.
What keeps the premiums lower in a Survivor Benefit Plan compared to other annuities?
You are required to pay premiums for the SBP, but there are several things that keep the premiums far lower than annuities you can purchase from a private insurance carrier.
If you are married at the time you retire from the military, your spouse must agree to the survivor election you choose. If you elect no survivor benefit or something less than the maximum benefit, your spouse must complete a Spouse’s Consent to Survivor Election.
