John 3:16

Amazingly useful posts guys - please keep it coming (STS).

My question is, is there some prohibition against taking SBP and having life insurance as well? My gameplan is to do both, and am comparing VGLI vs other life insurance options. Anyone in the know?

For background, I'm 50, retiring USAF O-6 F-16 pilot. Kids are grown and gone, so it's just me and the hot blonde. I've got a class date at SkyWest (haven't flown since '06), and another civilian flight instruction job lined up, still struggling to decide what I really want to do when I grow up...

MPAdriver

I have spoken to financial planners, peers, etc....and I even suffered thru the USPA&IRA era, yep I lost there big.

SBP -
#1 everyone's situation is different, so you have to decide what makes sense for you and your spouse. Full SBP will cost you between $240-$280 per month depending on rank.

#2 you can do both. But when you look at return on investment and what does your spouse NEED and how would you like her to live, when you move on to the great blue yonder. What I found were a couple things that if I were in that situation then I would go SBP. My wife was 10 years or more younger. I had young children and I was 50 or older. I had bad health and or any combo of the above. My wife did not and is not going to work. I did not have a retirement job where I was going to be saving money. I could not get a reasonable and large life insurance policy (see Navy Mutual Aid).

My situation: Me 41, Wife 39: kids 19,18,11. Wife has been a PERFECT military-stay at homemaker, but never worked. However she is in Physical Therapy School and the average salary is $40k per year. If I kick the bucket today she can work from age 40-60 and be fine. She will only have one child at home for the next 7-10 years. I have $1 mil policy that is about $80 per month. So if anything happens between today and me turning 60, she's good, if not great, b/c she would also have my social security. SO that is my plan from 41-60 years of age.

Hopefully I last longer than 60. If so, then I will have worked from 41-60 and saved additional money (this is where you have to figure how much you will need to save to get you/spouse from 60 - 85ish/90ish).

MY plan/situation - Work at UAL from 41-60ish (currently UAL poolie). At a min I will be saving 16% annually in the B fund - likely much, much more in the coming years. After year one airline pay, we will bank every mil retirement check from 42 years old until at least 60 years old. I will keep my $1 mil policy until it expires at 60, just in case...oh yea by the way, Navy Mutual Aid DOES cover you with no extra expense if you ball it up on short final (aviation clause).

Anytime after age 60 and I take flight to the blue yonder, wife will have 18 years of banked mil retirement checks + all the savings from 20ish years of my second career + my social security. If she can't live on that in a very nice way, well then .....she needs to go to work (LOL).

That is my plan....I am always looking for holes in it, so if you see any feel free to ask away.

e6bpilot

Wow. That is extremely cheap through NMAA. Is 60 their limit? I only ask because I am planning on having to support kids in some form or fashion until I am about 60 but saw my dad pass when he was 62 and he really regretted letting his life insurance lapse when he was 60.
I like your plan. I may pitch that to a financial planner. The only scary part for me is the possibility of losing my medical. I have a MBA and some relatively marketable skills, but reinventing myself again would be tough.

MPAdriver

Term life insurance after 60, if available is expensive.

Loss of medical is my biggest worry! But I am 41 with maketable skills (other than pilot) and I could even use the Post 9/11, if I really had to in order to get new skills. Heck, I could probably even find some gov't GS 12 job IF I had to.
IF I could not work at all....well the wife would HAVE to learn something and go to work b/c SBP only pays when you DIE.

e6bpilot

USAA goes through 75, but their rates are almost double. I am 40 and I was about 148 a month for 800K.

F15Cricket

First off, congrats! On retiring, on the flying job, on the grown kids, on the hot blonde (hopefully, she's your wife, otherwise life's about to get REALLY expensive)!

Anyway, I did not do a detailed SBP number crunching, but my thought was to take a multi-pronged approach: life insurance, SBP, savings, social security. No single one will be required to take care of my wife if I die anytime soon, but the combination will allow her to keep a decent lifestyle (she's a stay-at-home homeschooling mom, we have 6 kids, 3 of which are still being homeschooled).

My thoughts on SBP specifically was it's a REALLY expensive life insurance now, but in 20 years, it's a REALLY cheap life insurance that I won't be able to match. So, pay more now for a good deal later (generally, you cannot sign up for it after you've retired. In fact, if you decline it, you and your wife must sign the form acknowledging it.)

I had a friend (O-5) who retired about 8 years ago and did not take SBP. Within a year or two of retiring, he died in an L-39 crash. His wife's comment was that she went from a 6-figure income to about $35k a year.

On the other hand, I had a friend who retired as a 29 year O-6. His SBP payment would be $500+ per month ... not worth it in his financial planner's number crunching.

For me, as a 22 year O-5, I thought it was worth it. It still hurts each month when I look at my retired paycheck, but it will pay my wife $2435.65 per month in income for the rest of her life if I die tomorrow. Assuming she lived another 40 years, that's not too bad.

gr8vu

Here's how I looked at it...my lifetime retirement check wasn't worth the gamble that even remotely someone might call me on the technicality. It would be easy to justify since I burned at least 10 days of leave the past year going to interviews and job fairs so one could argue it is "owed" to me but in the end I wouldn't have any defense. So I asked to move up my retirement date so it wouldn't be an issue. Do I really think anyone is going to be watching out for this, NO but I've worked too hard to put it all at risk.

gr8vu

More insurance thoughts...I am 46 with 7 kids from College to pre-school (yes we know what causes it and surgery should have fixed it but we still had #7...not LOL haha).

I am also an avid investor and careful planner (but definitely not a professional). If you want to meet someone who actually bought term and invested the difference then come to my house. I have put away 20% of my income most of my career and am well positioned for retirement as a 22 year O-5 but not confident enough that my stay at home wife (teaching degree) can survive into her 90s just yet especially with young kids.

I bought Army AF Mutual Aid 800K insurance back in my twenties at 35 a month. Knowing it would expire at age 50, I've layered it with other 20-30 year term policies when I knew my health was good and my flying wouldn't impact my rates. Watching my friends over 45 it became obvious that your health can turn in an instant so I've been very careful to plan my purchases (especially when I was on staff and when I quit flying GA planes for long stretches).

After age 50, I will have 400K of Army AF Mutual Aid 30 year term (good til 75) for $65 a month and a USAA 250K 20 year (age 65) for $30 a month. I will also double the USAA to 500K when I retire this year. Overall I am planning right how to have at least 900k of term insurance in place for the next 20 years and at least 400k after that for a total cost of 42K til age 65. Price out some whole life now and see how that compares or VGLI. But again you gotta be able to get the best rates. USAA pricing has never been outstanding but they have some beneficial riders that have applied to my family situation that make some of their policies workable.

SBP--been watching this since the academy and I just can't find any product that will provide the inflation protection of this product. For my large family and still growing retirement nest egg, I want to know that my wife will not have to work to raise the family and can enjoy her health as long as it lasts. To have the same confidence with another product I've gotta go high like 2 Million term or hope I live long enough to put more away in the next 20 years and buy some whole life now to fill the gap--very expensive.

For me--no question SBP. When my parents passed a few years ago, I remember getting a 5k insurance policy payout that my mom had purchased in the 1950s--didn't put a dent in the settling of her estate. If I die this year, my wife could get inflation adjusted income for the next 50 plus years. IMO you can't guarantee this anywhere else for 250 a month. This also gives me the flexibility to cancel my term insurance when my family matures and I reach a more comfortable retirement nest egg. My airline job will also give me the chance to adjust this planning based on their life insurance products and costs. I can also reprice everything to a 28 year term policy this year since my health is still good but now I will have to check AIRLINE PILOT so not sure what that does to AAFMA and USAA rates.

Dragon7

John,

Somewhat similar circumstances. You can have both SBP and insurance. i do. Problem is most companies require a physical after age 48 to get life insurance and they will look for any reasons to say no, e.g. BMI, sleep apnea, skin cancers removed, PSA, BP, etc. Good idea until you can replace the insurance with your own assets. Currently Fedex has a DB plan as their main retirement vehicle and think that has some provision for paying after your death. Other flying jobs are almost all B/C plans with some in the 15-16% contribution range. Yours from the git go. Add your max contribution and as a late starter in airline game you may be able to exceed reduced DB payout with 401k/B/C contribution.

Advice shared with me and will pass on is if you can do something else and be happy go do it. The path to a major is not easy, but the reason people do it is because if you love to fly, or you have grown tired of politics, paperwork, and 9-5, there is not a better job. PM me if you have any other questions.

D7

MPAdriver

This was my dilemma (obviously made a little easier when UAL called), I had/have 2 very nice offers for jobs that would have been politics, paperwork, and 8-6 with a similar salary potential.

But I still love to fly and the thought of a job where I do not have to check email 24/7, manage large number of people/problems and a budget just did not sound as fun as "show up for work, jump in the jet, walk away at the end of the mission".