Every military retiree signed an SBP election. Most remember it as one of forty signatures that day. It was the only one that decided what your spouse lives on after you're gone, and for a lot of households it's the single largest asset in the estate: a lifetime, inflation-adjusted income stream that no will, trust, or life insurance policy replicates. It also doesn't appear in any of those documents, which is why estate plans for retirees so often get built around it without anyone saying so.
This post is the SBP conversation we have with every retiree household, and the first thing we say is: find the election and read it.
What you bought
If you elected spouse coverage at the full base amount, you pay 6.5% of your gross retired pay, before taxes, every month. When you die, your spouse receives 55% of that base amount for life, adjusted every year by the same COLA your retired pay got. If your spouse remarries before 55, the annuity stops, and resumes if that marriage ends. Premiums stop after you've paid for 30 years and reached 70, and coverage continues.
Three features make SBP different from anything you can buy. It's indexed to inflation for the survivor's whole life, which no commercial annuity does at that price. The premium is subsidized; the government pays a share of the actuarial cost. And it can't be lost to a lapsed payment, a carrier's insolvency, or a health change, because it's deducted from retired pay by DFAS until the day you die.
What it isn't is a lump sum. A spouse who needs $300,000 to pay off the house the month after the funeral doesn't get it from SBP.
What the election does to the rest of the plan
Start with the math your estate plan should carry. A retiree drawing $4,000 a month in retired pay who elected full SBP leaves a spouse $2,200 a month, indexed, for life. For a 60-year-old spouse with a 25-year life expectancy, that's an income stream a private insurer would charge well into six figures to replicate with inflation protection. It's an asset. It just doesn't show up on a balance sheet.
That changes three decisions.
How much life insurance the plan needs. Term insurance is the usual substitute for SBP, and the comparison is apples and bicycles. Insurance is a lump sum that has to be managed, invested, and made to last; it expires at the end of the term; and it gets expensive or unavailable exactly when the retiree ages into the years SBP covers. The households that do best treat them as complements: SBP for the floor, insurance for the lump-sum needs, the mortgage, the kids' tuition, the business buyout.
The trust that holds the insurance has to be designed knowing the SBP floor exists.
How the will and trust allocate everything else. If the surviving spouse has SBP and the house, the children from a prior marriage may be the ones who need the liquid assets, and
the blended-family plan can lean that way without leaving the spouse short. A plan drafted as if the spouse had nothing coming will overcorrect.
Who you name as beneficiary. SBP goes to the spouse named in the election, or to children under the child-coverage option, or in limited circumstances to a former spouse under a court order. It can't be assigned to a trust and it can't be redirected by a will. A retiree who divorces and remarries has a one-year window to elect coverage for the new spouse, and a divorce decree that requires former-spouse coverage has to be filed with DFAS within a year or the former spouse loses it. Those are the SBP equivalents of
the stale SGLI beneficiary form, and they fail the same way.
The DIC question, settled
For decades, a surviving spouse who qualified for both SBP and Dependency and Indemnity Compensation, which is paid when the veteran dies of a service-connected cause, had the SBP annuity reduced dollar for dollar by the DIC. The offset was repealed in stages and ended fully on January 1, 2023. A spouse now receives both in full. That changed the SBP calculus for every retiree with a high VA rating: the old advice that SBP was a poor buy for a 100% veteran because DIC would cancel it is dead, and a retiree who declined SBP on that reasoning before 2023 made the decision on rules that no longer exist.
There's no way to re-enter SBP today. The 2023 open season closed, and the next one requires an act of Congress. If you declined, the plan has to be built without it.
The windows you have
Two, and both are narrow.
If you elected SBP at retirement, you can withdraw during the window between your second and third anniversaries of retirement, with your spouse's written consent, and you get nothing back. After the third anniversary, you're in for life. If you're inside that window and reading this, the decision deserves the same analysis as the original election, which is to say more than it got.
If you're not yet retired, the election at retirement is the one chance. Declining or reducing coverage requires your spouse's notarized concurrence, which is the law's way of making sure the person who bears the consequence is in the room. Take the signature seriously. The default, if you do nothing, is full coverage, and the default is right for most households.
What the plan should say about SBP
Three lines. That the election exists and what it provides, in dollars, so the executor and the spouse know what's coming. That the premium is pre-tax and the annuity is taxable, so the surviving spouse's income plan accounts for it. And that the SBP annuity, DIC if it applies, and any Social Security survivor benefit arrive on different schedules from different agencies, with DFAS needing a death certificate and a claim form to start the first one, and the folder should contain the forms.
Where we come in
We're a veteran-led firm, and our estate plans for retirees start with the SBP election, because everything else is built around it. If you've never read yours, or you declined it on advice that predates 2023,
reach out.
