Survivor Benefit Plan: Is It Worth It?

Every military retirement briefing eventually gets down to the one vital and annoying question: Do you want to give up a few hundred bucks a month now so your spouse doesn’t get financially kneecapped later?

If you and your spouse both knew how consequential your answer would be coming into this question, you’d never stop looking sideways at each other. 

This is the Survivor Benefit Plan question. And families don’t agonize over it because they’re confused about percentages. They agonize over it because the decision comes when you’re really calculating your take-home retirement pay, and now somebody wants you to carve $300 to $700 out of it every month for a benefit you hope nobody needs… at least, not anytime soon. 

It’s an awful sales pitch, and it’s also why people talk themselves into bad decisions. You haven’t even retired yet, and you’re already thinking about your own untimely death. And you can’t take your answer back, so you need to come in with the decision already made.

So, is the Survivor Benefit Plan worth it? 

It comes down to this: Military retired pay dies with the retiree. The mortgage, however, lives on, and Kroger only pretends to lower food prices. The Kroger Company will take all of your surviving spouse’s money and not feel bad about it for a second. 

But the SBP keeps part of your retirement income alive for your spouse. They’ll be able to keep the house, keep the lights on, and buy groceries at a store that doesn’t hate them. 

For married retirees, the system defaults to full spouse coverage if you do nothing or if your election is invalid, and if you want less than full spouse coverage or none at all, your spouse has to sign off with a notarized agreement.

That fact alone should tell you what the government thinks of this decision. It’s not like canceling a Netflix subscription. It’s treated like something that can wreck a spouse’s finances for decades if the retiree muffs this decision.

A lot of retirees muff this decision.

They might start telling themselves they’ll just invest the difference. Or buy term life insurance. They’ll pay off the house faster or generally make up the gap another way. Sometimes that’s true. We all want to believe that’s true. But life can get in the way. 

You’re not young anymore (hence the retiring). You could find yourself buried in surprise medical bills. Or your mortgage could go belly up. You could even start a business that wipes you out. There are a thousand little (and big) ways to find yourself in debt. That’s when those investments or other gap savings plans start to get liquidated. 

The SBP is not regular life insurance; it’s an annuity. You pick a base amount between $300 and full retired pay. The surviving spouse gets 55% of that amount, and the benefit rises with the same cost-of-living adjustments applied to retired pay. 

For spouse coverage, the premium is a maximum of 6.5% of the covered amount. Premiums usually come out before federal tax, which softens the hit a little, and if you live long enough, the premiums stop once you’ve paid for 360 months and reached age 70.

That paid-up part gets lost in the sauce a lot. People talk about the SBP like it’s some forever tax on having a pulse. It isn’t. It’s expensive, yes. Annoying, for sure. But not forever. Nothing lasts forever, including you. That’s why you’re considering the SBP in the first place.

So say your retirement pay is $5,000 a month. Full spouse SBP would cost about $325 a month. In return, your spouse would get about $2,750 a month for life if you die first, adjusted over time with cost-of-living increases. That’s not a consolation prize, it could mean the difference between your loved one staying in the house or selling it while planning your funeral. It’s cold, hard math but the consequences can be even frostier

So is it worth it? For a lot of military families, yes. Unequivocally, yes.

If your spouse would need your retired pay to keep the household running, the SBP is the responsible answer. If your spouse has a lower income, spotty retirement savings, no pension of their own, or would be forced to start liquidating assets to survive, a guaranteed income suddenly becomes super important. 

People love to say they can do better investing the premium difference. Maybe. But the widow or widower doesn’t get to spend your spreadsheet. And be honest with yourself, Wolf of Wall Street. Do you really think your investments are really going to set your loved one up when you’re not around? Really consider that, because this is the rest of their life we’re talking about. 

Now, that doesn’t mean full SBP has to be mandatory for everybody. Some families really can afford to pass on it, or at least reduce it.

Maybe your spouse really is an investing guru and has strong dividend income. Or the house is nearly paid off, or you have a large TSP balance and actual discipline about how it would be used. You might even have other permanent insurance in place. Hell, your pension may not even be what’s holding the entire household together. 

If any of those are true for you, then full coverage may be more than you need. Reduced coverage exists for a reason.

You can elect a smaller base amount and cover the bills that absolutely must get paid instead of trying to replace the entire pension. Using that same $5,000, a $3,000 base amount would cost about $195 a month and produce about $1,650 a month for the survivor. That’s not everything, but it can buy breathing room.

Where retirees get themselves in trouble is debt.

A lot of people look at a credit card balance, a truck payment, college tuition, maybe a mortgage, and decide the monthly SBP premium is the problem. Sometimes it is. But sometimes debt is exactly why SBP is what you need. If you die next year, the Visa bill also lives on (if it’s a joint account or if you live in one of nine “Community Property Law” states). There’s also property taxes, insurance, car payments, or any of the other expenses your spouse will find while unraveling the web that is your personal finances. 

That’s the real test: if you died next year, would your spouse really be okay without your retirement pay? Not vaguely okay. Not “maybe okay if the market cooperates and the roof holds and nobody gets sick.” Financially good to go.

If the answer is no, the SBP is worth it. If the answer is yes, then maybe you reduce it, or maybe you pass. But that decision should come from a strong balance sheet and realistic budgeting, not from being annoyed that retirement already has its hand in your pocket.

This decision is a hard one at the time it's present. You can’t decline SBP at retirement and then come back later because you had a change of heart. Refusing the Survivor Benefit Plan is an irrevocable decision. 

Those who enroll and want to opt out later have a one-year window to terminate coverage between the 25th and 36th month after retirement pay starts. But that’s a mulligan, not a do-over. If you terminate during that window, previously paid premiums are not refunded, and the decision is permanent. 

There are narrow exceptions, including some cases involving a total VA disability rating, but those aren’t broad enough to build an entire retirement plan around.

So no, SBP isn’t always worth it.

But for the average retiring military family, especially one where the pension is load-bearing, it usually is worth it. It doesn’t feel good to lose a few hundred bucks before your paycheck ever gets to your account. And it’s certainly not cheap (nothing worth buying ever is). It’s worth the investment because your death is a terrible time for your spouse to discover that he or she is suddenly sh*t out of luck. 

That’s the real decision. It’s not whether you hate paying for SBP. Everybody hates paying for SBP. The question is whether your spouse can afford for you not to.