It's been about 18 years since the last Survivor Benefit Plan open season. I still remember it vividly because I was working with a USAA member who took advantage of the opportunity and signed up for SBP. It cost him over $30,000, but with the significant health issues that had stormed into his life since leaving the military, it made sense and filled a huge gap for his family. His relief at getting a chance to revisit his SBP decision was immense.
The SBP open season allows retirees and other eligible members who are not enrolled in SBP or Reserve Component SBP to enroll. It also allows those who are enrolled to permanently discontinue their SBP coverage. Those who enroll must pay the premiums plus interest they would have paid if they had signed up when first eligible. That's why the member I worked with in 2005 had to pay over $30,000 to get back in the program.
While every situation is unique, here are five red flags that should have you heading to the Defense Finance and Accounting Service (DFAS) SBP open season landing page or Coast Guard Pay & Personnel site to learn more:
1. You Lack Critical Protection
Many discussions about SBP try to compare the program to life insurance products. But SBP is a part of your overall financial plan. Yes, the complete picture: your balance sheet -- assets and liabilities, your insurance coverage now and in the future, and your financial obligations -- all need to be considered as you evaluate the open season opportunity. If you determine losing all of the monthly military retirement would cause financial hardship, it makes sense to request the numbers. What will it cost to enroll?
2. You Have Health Challenges
Like the member I worked with years ago, a terminal illness or scenario in which your life expectancy is significantly impacted might make a seemingly big cost to enroll financially feasible. For example, let's say your military retirement is $5,000 a month and you retired 10 years ago. It might cost you about $40,000 to enroll. That's a lot of money. But if you died next year, your spouse would recoup that cost in SBP benefits in about a year. That makes a lot of financial sense.
3. You Missed a Window
If you left the service and had no beneficiaries, you may have opted out. If you get married or have children in the future, you have a year after the life event to sign up for SBP. If you missed your window, this open season affords you the opportunity to sign up.
4. You Didn't Keep Up Your End of the Bargain
Perhaps when you retired, you anticipated that new employment income combined with your military retirement check would turbocharge your savings and investments, ultimately making SBP's protection irrelevant. Instead, life happened, and it took you longer than expected to land in the right spot (eating up financial reserves), or relocation and cost of living were more of a drain than you would have guessed. Maybe your investment moves were badly timing or never gained momentum. The point: Honestly assess where you stand, and don't be afraid to revisit your SBP decision.
5. Lifelong Inflation-Adjusted Protection Seems More Relevant
Priorities and perspectives change. I've often touted the stability and simplicity that SBP offers the beneficiary. Those may sound a whole lot better as you've matured. Maybe being able to rely on the inflation-adjusted benefits hitting your beneficiary's bank account like clockwork sounds a whole lot more appealing as you have aged.
To stay abreast of the latest information on the process, visit the DFAS website. Evaluate the opportunity and make a decision that works for you and your family.
Amanda Miller can be reached at amanda.miller@military.com.
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