Should I Pay for SBP or Buy a Life Insurance Policy?

I run into a lot of people who balk at the price of the Survivor Benefit Plan (and the reserve component version, as well).  They typically respond with a gruff “I don’t want to pay that” statement and then claim they’ll just buy a life insurance policy instead.


Some people also say they don’t want their pay “reduced” in order to cover their spouse.  I have a counter to that.  When you receive your leave and earnings statement and see a deduction for Servicemembers Group Life Insurance or an allotment for a car payment, is your pay being reduced or are you paying for a product or service?  The answer, naturally, is you’re paying for a service / product.


Sure, the reserve component survivor benefit plan can equal as much as 3.5% of retired pay and its active component version can be as high as 6.5% (reservists pay both premiums when they receive retired pay. The rules are slightly different for active duty retirees).  Ten percent of your money coming out of your monthly payment can seem like a lot and life insurance can be a tempting alternative.  Is it the best idea, though?


I have found it best to compare life insurance to the SBP and see how things pan out.  I am going to do this for you in this article.  For this comparison, I am going to use the example of a master sergeant (or pay grade E-8, for those of you who are not Army) who has 5,000 retirement points.


This individual would have, roughly, a $2,000 per month retirement payment.  His SBP premium for a spouse (who is three years younger than he is) would be around $200.  That sounds like a lot, yes, but let’s take a closer look at the numbers.  I am including a copy of my calculations in the resources section so you can follow along, if you like.


Let’s assume this person has a $250,000 life insurance policy and dies this year at the age of fifty-four.  For a fair comparison, we’ll also assume the widow only draws from the payout the same amount of money she would get in survivor benefits (she would likely need more to sustain herself).  If the widow were to take from that policy only the amount she would receive from the SBP ($1,100 per month which is 55% of the service member’s retirement), she would run out of money at the age of seventy-one.  It is possible to outlive a life insurance policy but you cannot outlive the survivor benefit plan.


The actuaries at the Department of Defense (read bean-counters) estimate the widow would live until the age of eighty-five.  This means she would have fourteen years without any money from the life insurance policy (we won’t count other streams of income).  If the husband’s intent had been to provide enough money for her to live at least at a subsistence level (again without considering other income), he has fallen short.  My calculator estimates he would need over $550,000 in life insurance in order to allow her to survive until eighty-five.  If he wanted her to have twice as much money each month ($2,200), he would need over $1.1 million.


This is a lot of money no matter who you ask.  Now let’s take the cost of life insurance into account.  Not only that, let’s take the husband’s age into account.  A fifty-seven year old man who is seeking $550,000 in life insurance is going to pay a hefty premium for that much coverage even if he is in good health and doesn’t smoke.  Now imagine what it could be if he wanted twice that much insurance.


I had a man who was wanting to do just this.  I told him he would face a much higher premium than the SBP premium for equivalent life insurance.  He decided to check anyway (and I applaud him for it).  He wanted $800,000 in coverage and went to one of many life insurances websites for a quote.  The best offer he was able to get as a premium was $788 per month.  The SBP amount was less than half of that.  He decided to do what I suggested which was in that case to keep the amount of life insurance he currently had and take the SBP coverage.  He chose to do just that.


My suggestion to that person is exactly what I typically recommend to people who bring up the life insurance option.  Supplement the SBP, I say, but don’t refuse it.  Most people accept my advice, thankfully.


Now let’s talk about a few other items of interest regarding the survivor benefit plan.  First, the premiums you pay only come out of your retired pay.  You would pay for a life insurance policy as soon as you agree to take out the policy whether you’re receiving retirement or not.  Next, the premiums are not taxed.  They come out before taxes on your pay are computed (try that with a life insurance policy).  Lastly, the survivor annuity is indexed for inflation every year; a life insurance policy stays the same no matter how much time passes.


That’s enough of my ranting for one day.  I hope this article has provided some information worthy of your consideration.  If you have any questions or comments, please post them below.  I always like knowing what others are thinking.


Thanks for joining me today and, of course, thank you for your service.




Retired Pay Estimate with Life Insurance Comparison

Podcast Episode 0033 – Should I Pay for SBP or Buy a Life Insurance Policy?

Retired Pay Estimate with Life Insurance Comparison

YouTube Episode 0035 – Should I Pay for SBP or Buy a Life Insurance Policy?

Retired Pay Estimate with Life Insurance Comparison

Mrs. Gloria Jackson – An Introduction to the Fettinger Project

The Blended Retirement System series is finally complete.  I think it’s time to talk about something other than boring forms, all sorts of numbers, and bits of public law.  I’m going to tell you about an effort that has been ongoing in my region for quite a while now.  Like any good story, it is rife with ups and downs, victories and defeats.  I’ll begin with how this project began and then continue with the most recent story to develop from it.


The name of the lady who inspired this endeavor is real.  I have permission to use her name and story in the efforts of identifying and assisting other people who face similar situations such as hers.  All other names and, in many cases, locations have been changed in order to protect privacy.


In late 2013, Mrs. Kathleen Fettinger approached our Survivor Outreach Services section to inquire about any service benefits her husband may have earned.  The SOS Coordinator, Mr. Frazier Thompson, asked me to join in the conversation after a few minutes (I was only a few desks away at the time).  Mrs. Fettinger’s husband, Gerard, has passed away two years before after a multi-year battle with cancer.  He was sixty-two years old when he died.


As the conversation developed, we soon discovered that Master Sergeant Fettinger had never applied for his military pension when he turned sixty.  His physical and mental condition had deteriorated significantly as a result of his medical treatments.  This caused him to forget completely about his military service and his retirement benefits.  Mrs. Fettinger also was not aware that he had earned anything of the sort to include survivor benefits.  Naturally, we jumped at the chance to assist this lady. To further sadden the situation, the amount of retirement MSG Fettinger would have received – along with the Tricare benefit – would have been enough to keep them from having to declare bankruptcy.  The short answer is we were able to get the survivor benefit for her right away and, after a yearlong wait for the Army Board for the Correction of Military Records to make its decision, also obtained all of the retired pay her husband would have received.


Later that day after Mrs. Fettinger had left us, I was talking about her case with a volunteer who was helping us in retirement services.  We were stunned by the fact that someone had not applied for the benefits he had earned at the right time.  As the conversation progressed, we began to wonder how many others out there were like MSG Fettinger.  The good news was I had the tools to answer that question.  Over the course of the next several weeks, I scoured our National Guard retirement points database, information from Army Human Resources Command, and the Defense Finance and Accounting Service (DFAS).  Ultimately, a list of forty-five names appeared.  My volunteers, members of the Survivor Outreach Services section, other coworkers, and I began to search for these people.  We dubbed our efforts “The Fettinger Project” in honor of Mrs. Fettinger and her husband.  As of this writing, all but one has been located (that guy is living off the grid in a cabin somewhere in the forests of North Carolina).


I would like to tell you about the last person we found on that list.  Who knows?  I might make this into a recurring series of good (and sometimes bad) stories.


Sergeant John Jackson was a man I feared we would never find.  He was nine years late in applying for pay.  Not only did he have a very common name and live in a large city with dozens of people with that name and similar age, his contact information was so old as to be completely useless.  Pretty much, I had given up on him.  There was still that needling urge to keep trying from the little man in the back of my head, though.  Every now and then when I had a moment to breathe at work, I would continue in my search.


A few months ago, Mr. Thompson, whom I mentioned earlier, introduced me to a smartphone app which had helped me locate a name on the list.  I decided to try again one morning during some downtime at a leadership conference a few weeks ago.  Of course, there were again several names on the list which could have been SGT Jackson.  One of them, though, had a previous address which was the one I had in my old records.  I dug deeper into the profile on the app.


In the list of possible addresses was another bit of information: the time first and last seen near that address (in a way, it’s scary how much information is online).  The address at the top of the list, possibly the current address, had this information, as well.  I gasped in audible dismay when I read it.  The last time he was seen in that area was 2008.  I actually felt chills at this point.  Could he have died years before and we would never be able to help him as a result?


I dug further, this time using a search engine, and felt myself crash further.  I found his obituary and the place where he was buried, a state military cemetery in the northern part of the state.  He was fifty-nine when he passed away.  I remember releasing my pent-up breath at this point.  It was over.  I had found him too late.  In fact, I was five years too late when I even began looking for him.  Failure.  Complete, abject failure; the worst sensation imaginable in this line of work.  I had failed to help him and his family. Or had I?


Another thought came into my mind.  Wasn’t SGT Jackson married?  Was his wife still alive?  I delved into what few records I had on him and found his survivor benefit election certificate.  There is was.  He was married to Gloria.  Was she still with us?  Could I find her perhaps?


Back to the app I went.  Almost instantly, I found a name with the correct age.  It even had the last address I had found for SGT Jackson.  There were two possible phone numbers.  By this time a coworker had walked up and noticed my obvious intensity.  I quickly explained what had happened in the last few minutes.  He visibly paled and then brightened again as he listened.  I picked up my cell phone and dialed, a silent prayer on my lips.  The other side of the line rang twice and then went to voicemail.  I left a message and immediately tried the other number.  It rang incessantly with no answer.


I tried those numbers fanatically over the next three days. There was no change.  The first number always went to voicemail after two rings and the second just rang on and on.  The specter of defeat loomed again.  What was I to do now?


A strange thought came to me at that point.  Several weeks earlier, I had located one of the few people left on the Fettinger list by asking assistance of the local police department.  In that case, I had contacted a police operator and asked simply whether the retiree was in fact living in the town or not.  Upon hearing my story, the operator decided to call him and give him my number.  The retiree called back half an hour later.  Would this option work for Mrs. Jackson?


I decided to try it.  I called the local police and recited my tale to the operator.  At first, I thought it did no good whatsoever.  The operator said he would look into it.  How detailed a response could I expect, though?  I was asking for the personal information of a private citizen after all.  The next day, however, I got a bit of a surprise.  The deputy chief of police called me and left a message.  We played phone tag for another day before finally catching each other near our phones.  He listened to my more descriptive version of the story and made a decision on the spot.  He would go to Mrs. Jackson’s house and deliver the message.  “It will be my feel-good story for a Friday,” he said.  That was around one o’clock in the afternoon.  I figured I would not hear anything further until Monday.


For the next half hour, I tried to plan some training with a coworker but we were interrupted by a visit from our former branch chief.  The work slowly devolved into the laid-back conversation of many office workers on a Friday afternoon.  Just goofing off and waiting for quitting time.  Even I, a noted workaholic, am susceptible to it on occasion.  Our talk continued when the phone rang.  I answered it in a casual tone since I expected it to be nothing more than the average request for information from somebody or another.


“Hello, this is Gloria Jackson,” I heard through my Bluetooth headset.  I nearly sprang out of my chair.  My coworker scooted away from me slightly to give me room.  Having overheard my call with the deputy chief, he knew what was happening.  I vaguely remember him telling the former branch chief about it ask I answered Mrs. Jackson.


She was alive and well.  She had a different address and phone number, but she had finally been found.  The deputy chief had left his card with a message at her house and a friend had contacted her.  She had taken a break from work and called me right away.  Count your minor miracles.


Mrs. Jackson asked who I was, why I was looking for her, and what it had to do with her husband.  I explained it all.  Amazingly, she was very much like Mrs. Fettinger in her response.  She did not know her husband had earned a pension and also did not know about the survivor benefit.  She was skeptical. That much was obvious. Maybe I was a scam artist, she may have thought. I tried to talk her through her suspicion. I couldn’t let this small victory slip away. She finally agreed to meet me but only in a public place.  I said she could choose any location she liked.  She suggested the station where the deputy chief worked.  I agreed instantly and arranged a time (I was two hours away and need time to get there).  I then called the deputy chief who readily acquiesced to my request to use his facility.


I was practically shooed out of the office by all of my coworkers.  They were quite familiar with my obsession with this project.  I have practically a full mobile office in my vehicle; a printer, office supplies, et cetera.  All I had to do was pop my work laptop off its docking station and throw it in its travel bag.  After topping off the gas tank, I was on the way.


I began to think about the implications of what I was about to do.  Not the meeting of a retiree or a spouse outside of the office.  I actually do this with quite a bit of regularity (call it part of the obsession).  I realized as I drove that I had more to do than a simple survivor annuity application.  I had to deal with bureaucratic annoyances galore, as well.


For example, since this request for a survivor annuity was nine years after the death of the retiree, Army Human Resources Command definitely was going to reject it.  They do this automatically for any survivor request more than six years old. This is in accordance with a law called the Barring Act which disallows back payment of government obligations older than six years. I had to prepare an appeal to the Army Board for the Correction of Military Records.  They were the only entity with the authority to overturn the rejection.  Even if the board agreed with the appeal, they still have the obstacle of the Barring Act.  I had learned a year and a half ago from a person at DFAS that a waiver can be obtained for this limitation (up to $25,000).  I would have to write the request for a waiver, as well.


I know all of this sounds like the whining of a soft-handed office worker. Well, I wasn’t always an office guy.  I was a real soldier once and the loyalties you develop don’t wither away rapidly. We are talking about the welfare of a military family member, by the way.  I experienced the same necessity to help her that I did when I lost friends while overseas, an overwhelming compulsion to do whatever must be done for the families of the fallen.  This wasn’t just another task for a desk monkey.  It was a mission to help someone in need.


I had just developed my plan and was almost at the police station when I received another call from Mrs. Jackson.  She was going to be an hour late because she still needed to find some of her husband’s records (I had asked her to bring whatever she could find).  This was actually a good sign for me.  It would give me time to prepare all the items I would need to assist her to the fullest.


I arrived at the station and set up my equipment.  The deputy chief had assigned another policeman to escort me (he had texted me saying he couldn’t be there because his wife would have his hide if he didn’t get home soon).  The officer who met me was a member of the Air National Guard and was completely sympathetic to my mission.  As with any two service members when they get together, we shot the bull for a while.  Finally, though, I had to get to work.  Mrs. Jackson would be there soon.


And she was.  I had only been working for about half an hour when she showed up early (well, earlier than our new meeting time).  She was already in tears.  It was her husband’s birthday.  She told us as she entered the conference room that she had imagined I was actually there to tell her he was actually alive.  Oh, how I wish I had that kind of news for her.  Instead, I was only there to tell her about service benefits and money.  How that pales compared to the loss of a loved one.


Mrs. Jackson and I did nothing but talk for an hour.  She would reminisce about her husband and I would just listen. Occasionally, I would ask a question.  Sometimes it was something I needed to know for one of the many packets and sometimes it was just conversational. I was reminded that she was ten years younger than her husband and learned also that she was working full-time to support herself. After a while, we slowly got to the business of our meeting.


I started by showing her the amount of the survivor annuity.  I apologized for the fact it would only be $334 per month.  She stated that paltry sum would make a great difference in her life.  That is when I learned that her take home pay from her job was only $1,500 per month.  I then showed her the first six years of back pay she could expect once we got everything fixed up: $24,400.  If the waiver to the Barring Act was granted, there would be another $10,000.  That is a total of over $34,000.  Her eyes became misty at that point.  Admittedly, I became the same upon seeing her reaction.


I asked if she was paying a premium for employer-provided health insurance.  She said yes.  I brought up the Tricare coverage she had actually had available since her husband’s sixtieth birthday (she never knew).  She started to cry in earnest now.  “I didn’t know he did all this for me,” she said.  The policeman accompanying use gave of a tissue for her tears.


We talked some more.  During the chat, she mentioned that her husband had served in Vietnam.  I perked up again and asked to see the DD 214 from his Vietnam service.  She showed it to me. I asked if her husband’s death was somehow related to this service. As we discussed it, I decided it just might be.  Things had just improved for her yet again.


You see, there is a stipend from the Veterans Administration called Dependency and Indemnity Compensation (or DIC).  It is a monthly amount of $1,257.95 which is paid to spouses of members who die from service-connected causes.  Now it does offset the survivor annuity dollar for dollar which means it would completely wipe out the $334 per month.  However, there is another type of payment called the Special Survivor Indemnity Allowance (SSIA) which is added to whatever remains of annuity (if any) and to the DIC.  It would be another $310 per month (this allowance is currently set to expire on 30 September 2017 unless it is extended by Congress).  I then made an appointment for her to meet with a Veteran Services Officer (VSO) in my area who could help her apply for DIC.  I thought it was worth the effort.  $1,567.95 per month beats $334 no matter what type of math you’re using.


I finally told Mrs. Jackson about all of the bureaucratic hoops through which we’d have to jump in order to get all of this arranged for her but added that the chances were excellent. She admitted that everything seemed quite surreal to her and stated that it was as if her husband were still watching over her.  The officer seconded that thought.  We signed everything and chatted some more. I then saw Mrs. Jackson to the door and promised to meet her again when she came to see the VSO (as of this writing, the meeting has not yet occurred). I also thanked the police officer for sticking with us through the entire three-hour meeting.


Overall, it was a good night.  I desperately wanted a cigar and a glass of scotch by the time I got back to my apartment, though.  I was exhausted but hopeful for Mrs. Jackson.  Here’s hoping that it all works out positively for her.




Thank you for joining me in the recounting of this story. I believe it is quite uplifting when all is said. It’s incredible that I have done my best to summarize this event and it has still amounted to five pages of written material.  Who knows what it will be when I actually post it to my blog.


I ask that you spread the word about this event.  Who knows how many other service members and their families are experiences similar circumstances.  I hope the other retirement services officers out there will be willing to replicate our efforts.  The results are invigorating to say the least.


I also ask that you spread this article around.  This is the kind of thing that people need to know.  They need to know about the efforts the RSOs are making. They need to know the effects this has on military families.  If you’ll do that for me I will greatly appreciate it.


Next week, we’ll get back to our usual business of explaining service benefits.  Until then, thank you for joining me and thank you for your service.



Podcast Episode 0021 – Mrs. Gloria Jackson – An Introduction to the Fettinger Project

Let’s hear a good news story this week.

YouTube Episode 0023 – Mrs. Gloria Jackson – An Introduction to the Fettinger Project

Let’s hear a good news story this week.