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By Bennett C. Whitlock III, Private Wealth Advisor
When a military member is preparing to retire from active duty or from the reserves, there are big decisions to make regarding retirement pension and survivor benefits. One option servicemembers may consider is the Survivor Benefits Plan, which provides retirement income to their family after their death. If you or someone you know is eligible for the Survivors Benefit Plan, here are answers to some common questions.
What is the Survivor Benefits Plan?
The Survivor Benefits Plan is a government subsidized program for retired military members and their families. This plan allows military members to reduce their retirement pension to pay with pre-tax dollars into the Survivor Benefits Plan. Upon the servicemember’s death there is a monthly annuity allotted to the plan’s beneficiary. The Survivor Benefits Plan allows military retirees to extend the amount of time they
receive retirement income, so that even after death they can ensure their family is taken care of.
Who is eligible to pay into the Survivor Benefits Plan?
Any servicemember is eligible to pay into the Survivor Benefits Plan after they’ve served 20 years in the military and elect to pay into the program upon their retirement. Veterans cannot opt-in to the program later than their retirement date; they must choose to join or forgo SBP when their retirement and pension begins.
How does SBP work?
The Survivor Benefit Program works by redirecting a portion of retirement income from a military member’s pension to the Survivor Benefit Plan. If the retiree chooses to opt into SBP, up to 6.5% of their gross retired pay, in pre-tax dollars, can be allocated to the Survivor Benefits Plan fund (1). The redirection of retirement income happens over several years. When the military member dies, any beneficiaries of the Survivor Benefits Plan will begin to receive monthly payments equivalent to the value of 33% or 55% of the servicemember’s pension payment. These payments are inflation-adjusted (2).
Who can be a beneficiary?
The beneficiary is the individual or individuals selected by the servicemember to receive the SBP payments after the military member’s death. Beneficiaries can be the military retiree’s children and/or spouse or an insurable interest, such as a business partner. For children to be eligible to receive the payments, they must be under 18 years old, or be 22, unmarried and a full-time student when the veteran dies. Once a child
reaches the age of 18 or is no longer 22, unmarried, and a fulltime student, the distributions will cease. A spouse will receive the monthly payments, if they are a beneficiary, at the time of the servicemember’s death and end at the time of the spouse’s death.
How long can a person contribute to the SBP?
A Survivor Benefit Plan is considered “paid out” after 360 monthly payments (30 years) and when the owner of the plan has turned 70. At that point, the military member can stop allocations to the SBP plan, and their beneficiaries will still be covered (3).
Can I cancel my plan?
The decision to pay into the Survivor Benefits Plan is often considered irrevocable. There is a small window of time between the second and third years of retirement in which the plan can be cancelled, but it cannot be renewed. Outside of this window, the SBP can’t be terminated except under very extreme changes in circumstances.
If you or someone you know served in the military, consider how the Survivor Benefits Plan can help provide financial confidence. A financial professional can help determine if this benefit is suitable for an individual based on their long-term goals and financial situation.
Bennett C. Whitlock III, CRPC®, is a Private Wealth Advisor and CEO with Whitlock Wealth, a private wealth advisory practice with Ameriprise Financial Services, LLC. He specializes in fee-based financial planning and asset management strategies and has been in practice for 30 years. To contact him visit whitlockwealth.com, call 877-WHITLOCK or email whitlockwealth@ampf.com. Offices are located at 12848 Harbor Dr, Ste 101, Lake Ridge, VA 22192 and in Downtown Historic Manassas at 9073 Center Street, Manassas VA 20110.
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(1) Department of Defense: “Survivor Benefit Plan Overview.” militarypay.defense.gov/Benefits/Survivor-Benefit-Program/Overview/
(2) Ameriprise Financial: “Ameriprise Advisor Handbook for Military Clients.”
(3) Department of Defense: “Paid-up Survivor Benefits Program.” militarypay.defense.gov/Benefits/Survivor-Benefit-Program/Paid-Up-SBP/
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