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Military Retirement Benefits: Pros and Cons of the Survivor Benefit Plan

Upon death, the service member's right to receive retirement pay terminates. The Survivor Benefit Plan (SBP) is an annuity program that allows retired or retirement-eligible active duty service members to provide continued income to specified beneficiaries at the time of the participant's death.  

The SBP is a unitary benefit and cannot be divided between a present and former spouse.  Without the SBP, the stream of pension payments to the former spouse ceases upon the death of the servicemember/retiree.  

The benefit paid out is 55% of the selected base amount. The maximum base amount is the full retired paycheck; the minimum base amount is $300.  

The cost for coverage is generally 6.5% of the selected base amount paid upon retirement by deduction from the pension check.

The advantages of SBP for the former spouse are numerous: 

1- Financial security.  Unlike commercial life insurance, SBP does not require a person to "qualify" for coverage and neither party must undergo a physical examination.

2- No lapse in coverage while premiums are being paid.

3- Servicemember cannot terminate coverage except with the spouse's consent.

4- Cost. Deductions from the service member's retired pay for SBP premiums are from gross retired pay.  This reduces his/her pension income as well as the income of the former spouse for tax purposes.

5- Cost of living adjustments.  Payments increase regularly to keep up with inflation.

While cost might be an advantage in one sense, it is also among the disadvantages of SBP.  Even though the premium payments are tax-free and are shared by the parties, the cost is relatively expensive as compared to term life insurance where premiums increase over time.  For most spouses and former spouses, it is worthwhile to obtain a comparison of benefits of SBP and life insurance.

Another disadvantage is inflexibility; as a general rule, once SBP is chosen it cannot be canceled.

Lastly, payments under SBP are halted for a widow, widower, or former spouse beneficiary who marries before the age of 55.  No such age or marriage limitation occurs when one purchases a life insurance policy.  

Whether you are a military servicemember going through a divorce or the non-military spouse, it is imperative to speak with an experienced military family lawyer to explain the complexities of military divorce.

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