To SBP or not SBP?
 

Gentlemen and Ladies,

Have gone round and round with this with the locals but want to hear what you all have to say pro or con on taking SBP?

Am I better off taking that 270 a month and getting a term or whole life insurance policy? I am thinking it is a big expense to give my spouse 55% percent of my avg high three 50%. I am an O-4 retiring at 20 years.

Can you change your mind later?

Thanks,
Spanky

I retired a few years back and did not the full amount. Additionally, I don't know anyone who did. A term life insurance policy is better. With that said, I did take a very small amount, I believe it was the smallest amount they offer. Did this just to "be in the system". Much like VEAP back in the day, you never know what it will morph into.

Spanky,
Quickly: Am a Reserve, so we face the RSBP decision. For an AC person, the consenus (of which I largely agree), it is better to forego SBP and deal with insurance needs on the market. I often argue that the Reserve folks actually give RSBP more consideration, and often a better deal to take the RSBP. Won't go into the reasons as you are AC.
Can you change your mind later? There is an exit if you take RSBP, not sure of SBP, but I'd bet there is a one time exit allowed. Can you get in later on. It has happened, but it is unpredictable and very rare. It is also expensive to go that route (essentially, must pay the premium back to the govt. as if you had SBP the whole time!) BTW, Congress has to approve it (reason rare, unpredictable and wouldn't count on it)
I took RSBP because of the uniqueness of being RC, but doubt I would have if I had been AC.

Don't think you can start it later if you retire, but you can stop it during a one year period starting on the second aniversary of your retirement date. I think you'll also need your spouse to sign off on the termination as well, along with having her sign off on anything less than full coverage when you start it initially. I went ahead and took the full coverage...don't know whether it was a smart idea or not. I've got other life insurance too...I think a mix of both is probably a good idea. Congrats on your retirement.

B2P

Hey Spanky,

A few of the active duty/FTS approaching retirement (Joel K & Chuck T) have discussed this down here in your old stomping grounds. We decided the term life route yielded more benefit in the long run. I plan on starting my policy now while it is marginally cheaper and I will make it the longest policy I can. FWIW, my father-in-law passed away at 67 and his wife now receives the SBP. If he had purchased a large term life policy she would be better off. But then again, if he had lived passed 70 (were most term life policies expire) this would not be the case.

MD10PLT's advice above does have merit given the changes we have seen on several programs over the last two decades.

I am looking more into long term care insurance than SBP as I have seen entire portfolios drained due to a long debilitating disease.

Boyd

I'll second that on the long term care insurance. I did the ltcfeds.com insurance for my wife and I several years ago when they started up. The rates are fixed and are cheaper when you get the insurance at a young age. There are other good LTC companies out there too...

B2P

I retired a year ago from active duty. I won't try to compare SBP with term insurance...it isn't exactly the same. Some points to consider: SBP is before taxes, so your income reduction is actually less than $270. Somewhere closer to $200, if I remember. Also, SBP increases with inflation, so you would also have to factor that in when comparing to term insurance.

I retired w/23 years (O-5) and chose a third option--SBP allows you to contribute a significantly lesser amount to cover your kids until they reach 22 years of age. Same amount gets paid (55%) but ends when your youngest child reaches 22. My wife works a full time job, has an MBA, so would not be dependent on my retirement. My SBP is there to cover her until our kids are out of college--all I was really concerned about.

If you have kids, this is something definitely worth asking about. They don't push that option very much, but it is in the contract.

Thanks. I will keep reading and my ears. Thanks to the Corpus Bunch. Miss the old low levels. Forgot the income reduction. Thanks again. Look forward to reading more on this issue.

Spanky

This is not a monetray decision, but one that lets you sleep at night. You can get dropped from a term life policy for whatevery reason the insurance company decides. Any time they decide.

Many insurance policies are "year to year" (you can cancel, and they can cancel) and you may end up with nothing.

BE CAREFUL and ask LOTS of questions of your insurance agent. But remember, just like the military personnel folks promising you something, his/her lips will be moving.

That being said, SBP is not cheap.

I've often wondered the same thing. I have a few years yet to go till retirement, so I hope this conversation keeps going. Here's my current votes in favor of continuing:
- Along with what was said above, it's government, odds are they'll pay
- I have a lot of term now, but it all expires at some point. What if my wife lives till 90 (and I don't)? In a perfect world we'll have enough in the bank by then, but what if we don't?

On the other side, it is expensive. And 55% really isn't all that much. I just don't know what the alternatives are.