When military members approach retirement, one of the most important financial decisions they face is whether to enroll in the Survivor Benefit Plan (SBP). The SBP was designed to provide ongoing income to a surviving spouse or dependent after a veteran passes away, the SBP offers financial security for the survivors—but it also comes with costs, conditions, and alternatives worth considering. For military families, especially those weighing this against other tools like private life insurance, a clear understanding of the SBP is critical.
In this article, we’ll break down what the SBP is, how it works, its pros and cons, and the questions every retiring military service member should consider before making a decision.
What Is the Survivor Benefit Plan (SBP)?
The Survivor Benefit Plan, or SBP for short, is a government-sponsored annuity program designed to ensure that part of a military retiree’s pension continues to be paid to a designated beneficiary after their death. Typically, this means the surviving spouse, but children and, in some cases, former spouses or other individuals can be named too. As a refresher, an annuity is just a regular stream of payments, just like your pension.
When a military retiree elects SBP coverage, they choose a "base amount" of their retired pay to insure. The surviving beneficiary will receive 55% of that base amount as a monthly annuity after the retiree's death. Most military retirees who elect to insure the entire base pay, resulting in a benefit of 55% of their base pay being payable to the beneficiary. However, it is also possible to elect to coverage on a reduced portion - for example, half of your pension. In that case, the calculation would be:
50% x 55% x Base Rate = 27.5% x Base Rate
Effectively, a military retiree has flexibility to insure up to 55% of their pension.
SBP coverage never runs out, increases with inflation and continues for the lifetime of the beneficiary unless otherwise specified (e.g., children aging out).
In short, the SBP is most comparable to a whole life insurance policy with an inflation rider.
How Much Does SBP Cost?
Like any insurance policy, SBP is not a free benefit. The standard premium for spouse coverage is 6.5% of the covered retired pay. This premium is automatically deducted from the retiree’s monthly pension.
There are some discounts for lower coverage levels or for child-only coverage, but in general, retirees must consider this as an ongoing expense.
The minimum coverage amount is $300. For amounts between $300 and the threshold amount, the cost is 2.5% of the base rate. Above that threshold, the cost increases to 10% until the effective rate reaches the default 6.5%. The minimum threshold amount was $750 in 2010 and is adjusted annually for inflation. As of 2025, it was $1,056.
Here is a table that shows the cost breakdowns for reduced amounts of the SBP in 2025.
For many families, this 6.5% can add up to thousands of dollars over time.
You may also add children as beneficiaries under the SBP for an additional fee. However, there are nuances to consider. First, children are only eligible until they reach 18 years of age, or 22 if they are full-time students. Cost are based on multiple factors, including your youngest covered child's age, your spouse or former spouse's age, and your age.
Importantly, children are only eligible if they are also the children of the spouse who is designated as the primary beneficiary. For example, if a court order designates your former spouse as the SBP beneficiary, only the children you share with that former spouse are eligible. Eligibility for children flows from the eligibility of the spousal beneficiary.
It is possible to reach "paid-up" status, at which point you no longer need to make payments but still retain SBP coverage. To qualify, you must be at least 70 years old and have made 30 years of premium payments. A military retiree who begins paying at age 40, for instance, could stop making payments at 70 - potentially freeing up cash flow during retirement.
What If the Spouse Passes Away First?
One drawback of the SBP is that premiums are not refunded if the designated beneficiary dies first. For example, if a retiree pays premiums for 10 years and their spouse passes away unexpectedly, the retiree does not receive those premiums back. The benefit is no longer in effect unless a new beneficiary is designated (such as a child).
This potential loss of value is something to weigh carefully. While elections can be modified in limited circumstances (such as divorce or remarriage), the original SBP decision is largely irrevocable after retirement. In my experience this is the single biggest complaint I hear from veterans regarding the SBP.
SBP vs. Private Life Insurance
A common question is whether private life insurance is a better alternative to SBP. The answer depends on many factors, including individual health, financial goals, and family needs.
Unlike SBP, private life insurance requires underwriting and health screening, which can be a barrier for older retirees or those with medical conditions. One of SBP's most critical benefits is that there is no health screening.
If someone is in good health and qualifies for a private insurance policy with sufficient coverage, life insurance may offer more flexibility, lower costs and the potential for greater legacy value.
Private insurance also allows for lump-sum payouts and control over beneficiaries, while SBP provides monthly income. Some families choose a hybrid approach—electing reduced SBP coverage and supplementing with life insurance. For example, a family might elect coverage up to the threshold amount (at a cost of 2.5%) and then supplement that with a private whole life insurance policy for the remained of the desired coverage. This approach helps spread the risk across multiple institutions and offers more flexibility in how and to whom benefits are paid.
Special Considerations for Reserve Component SBP (RCSBP)
Members of the Reserve and National Guard have a slightly different version of SBP, known as the Reserve Component Survivor Benefit Plan (RCSBP). Because Reserve members often retire in their 50s but don’t start receiving retired pay until age 60, their options are structured differently.
At the 20-year letter (when they qualify for retirement), Reserve members must make an election:
- Option A: Defer election until age 60
- Option B: Provide coverage that starts at age 60 if the member dies before then
- Option C: Provide immediate coverage upon election
These decisions are binding and can significantly affect a family’s financial security during the "gray area" years. If this applies to you, it's especially important to consider how your personal situation affect the value of each option.
SBP and Divorce: What You Need to Know
Divorce adds another layer of complexity. Courts may require SBP coverage for a former spouse as part of a divorce decree. In such cases, the retiree must notify DFAS and elect "former spouse" coverage within one year of the court order.
If former spouse coverage is selected, voluntarily or not, the current spouse and any children of the current spouse are precluded from coverage. In other words, only the former spouse and their children with you would be eligible. The current spouse must be notified when a former spouse election is made.
Costs and benefits for former spouse coverage are the same as for regular spousal coverage.
It's also important to understand that SBP elections in divorce are separate from the division of retired pay under the Uniformed Services Former Spouses' Protection Act (USFSPA). Additionally, if the former spouse remarries before age 55, the retiree may suspend SBP benefits. However, the benefits may be reinstated if the former spouse's subsequent marriage also ends.
Questions to Consider Before Making a Decision
- Do I want to cover just my spouse or also my children?
- Is private life insurance a better fit for my family?
- How does my health impact my insurance options?
- What’s the best plan if I divorce or remarry?
- Can I afford the SBP premium long term?
Conclusion
In my own family, I saw the consequences of my grandfather forgoing both the SBP election and not having an adequate life insurance policy.
Unfortunately, my grandfather passed away at the somewhat early age of 65 due to cancer which we believe was caused by toxic exposure he had while serving. My grandmother on the other hand has lived into her 90's missing out on over two decades of pension payments. I have no doubt that her quality of life has been severely degraded as a result of this one decision made decades ago. Having to sell her home and move in with family instead of aging in place is something I wish she could have avoided.
The Survivor Benefit Plan is a powerful tool for protecting your family’s financial future, but it isn’t the right fit for everyone. With its unique structure, potential costs, and limited flexibility, SBP should be carefully weighed against other available options like life insurance.
Whether you're retiring from Active Duty or the Reserves, understanding the nuances of SBP will help you make a confident, informed decision. As always, consult with a qualified financial advisor who understands military and veteran benefits to tailor a financial plan that fits your unique situation.
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Disclaimer: This blog post is intended for educational purposes only, it should not be construed as tax advice or financial planning advice. Consult a professional for tax and financial planning advice before making any changes. All photos are from open source domains.