If Something Happens After Retirement, Will You Be Financially OK?


When the worst of horrible things happen and your veteran dies, you may be surprised by exactly how you will be taken care of.

It may not be the amount of money you envision.

Many military wives have heard a similar statement from their veteran, "If anything happens to me, you will be taken care of. We have SBP. The Survivor Benefit Plan (SBP) is a retirement plan, which pays an annuity after the veteran dies.

This plan is part of the Department of Defense. Active Duty service members do not pay into the plan, but can choose to have the plan at retirement and start paying into it then. This plan is a great deal for veterans to ensure their family is taken care of when they are gone. You can decide what level you want it to cover, up to 55 percent of the retirement pay. That means, should your retired service member die before you, whatever amount he elected for coverage would be paid out to you every month, forever.

Here is the kicker -- and this came as a huge surprise to me:

If your veteran dies of a condition that the VA determined was related to his military service, or he dies of another condition not related to military service, but he was rated permanently and totally disabled by the VA for at least 10 years prior to death, you are eligible for a different payment called DIC (Dependency Indemnity Compensation) provided through the VA.

You can only get one type of payment or the other, not both. Whatever you get in SBP is reduced or "offset" by what you get from DIC.

While getting medically retired, my husband was told about SBP. I can't remember all of the details we were promised back in 2012, except we all laughed at the thought of trying to buy my husband term life insurance after his catastrophic injuries he suffered.

There was no explanation to us about the DIC offset so I just assumed SBP would take care of everything.

Here's the deal

Many veterans have been injured, are still in the Guard or Reserve and get treatment from the VA. Many have disability percentages and are still jumping out of planes and are boots on the ground.

If the DIC payment is more than the SBP annuity, no SBP is paid out, and what your service member paid into SBP before his death is refunded to you. Any SBP paid to you before the DIC is awarded is deducted from the SBP payout.

If the DIC payment is less than the SBP annuity, the spouse is paid an SBP annuity equal to the difference between the full annuity and the DIC. All money the service member paid into the SBP plan is refunded. Any SBP paid to you before the DIC is awarded is deducted from the SBP refund.

For example if the SBP is $2500, and DIC is $1250, the surviving spouse would get $1250 DIC and $1250 SBP.

The DIC payment is non-taxable. The SBP payment is taxable.

The retiree has to pay into the SBP plan until they reach age 70 and have made 360 monthly payments, after that no more contributions are necessary. Full coverage is based on the retiree's retired pay, meaning the spouse would receive 55 percent of that.

What if something changes?

Once your spouse passes away, contact Defense Finance and Accounting Services (DFAS) and the VA immediately. There are deadlines to file for the SBP payments, six years past the date of death.

To change your beneficiary in the instance of divorce or death of a spouse, you have a strict time limit to change it with SBP. Contact them immediately.

There have been changes to electing children as your beneficiary as well as if you have a child with serious health or mental health issues you can set up a way to provide payment for them.

I asked DFAS if I had to keep paying into this plan and if I wanted to, could I cancel. They told me if my husband had a VA rating of 100 percent for five years or more, we could stop submitting payments.

However, we would not get refunded any of the money we contributed into the plan and, of course, if something happened to my husband, I wouldn't have the SBP plan anymore and would be taking a chance that the DIC would result in a higher payment.

I strongly recommend as a couple, you discuss the benefits offered to you and your family and make a folder in your computer of what you have together to forge your financial future.

If you contact Defense Finance and Accounting Services (DFAS), you can speak to someone on the phone or you can visit the DFAS website to find out more information.

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