USAA recommends taking some or all of the SBP benefit. If you trust their advice, like I do, you should review their guidance from their web site.
They mention that there are many insurance salespeople who are anxious to get you to purchase their product, but the SBP has several attributes that make it tough to beat.
- SBP premiums are paid with pre-tax dollars. If you opt out of SBP, the money that would have gone to it will be subject to income tax.
- Your spouse is guaranteed lifetime income. Alternatives like life insurance may expose your survivor to the risk of missing a lump sum death benefit.
- Benefits automatically increase with inflation. A life insurance policy would have to be significantly larger to replace SBP.
- SBP is paid up after 30 years. Once you reach age 70 and have participated for 30 years, you no longer have to pay premiums.
- Social Security adjustments are being eliminated. Until recently, survivor benefits decreased at age 62, but this reduction will be completely phased out after April 1, 2008.
These features are really important to military retirees, particularly if they retire early. I’m taking the full benefit!