Overview of the Survivor Benefit Plan
The Survivor Benefit Plan (SBP) is a government program that allows retiring military members to provide a continuous, inflation-adjusted income to their designated beneficiaries after their death. When an eligible retiree elects SBP coverage, the Department of Defense deducts a monthly premium from retired pay. In exchange, if the retiree passes away, the chosen beneficiary receives a monthly annuity equal to 55% of the elected base amount. This calculator estimates both the ongoing premium and the survivor’s potential annuity, helping retirees determine how SBP fits into their overall financial planning.
SBP participation is generally offered at the time of retirement, and the decision carries lasting consequences. Electing coverage when first eligible typically results in the most favorable terms. Declining coverage requires spousal concurrence in writing, underscoring the plan’s importance for family security. The “base amount” is the portion of retired pay the retiree chooses to insure. It can be as little as $300 or as much as the full gross retired pay. Premiums are calculated as a percentage of this base, and the resulting annuity is 55% of the same figure. For example, selecting a base of $2,000 produces a $1,100 monthly survivor benefit.
Premium and Annuity Formula
The formula for calculating the monthly SBP premium depends on the selected coverage type. Let represent the coverage rate (for instance, 0.065 for spouse coverage), and let denote the covered base amount. The monthly premium is:
The survivor annuity payable after the retiree’s death is calculated as:
The calculator applies these formulas directly. For instance, if a retiree covers $3,000 with spouse-only coverage, the premium is $3,000 × 0.065 = $195 per month, and the survivor annuity is $3,000 × 0.55 = $1,650 per month.
Coverage Options and Rates
| Coverage Type | Premium Rate (%) |
|---|---|
| Spouse Only | 6.5 |
| Spouse & Child | 6.5 |
| Child Only | 2.5 |
Spouse coverage is the most common election and offers lifetime protection for the surviving partner. When spouse & child coverage is chosen, the annuity passes to eligible children if the spouse becomes ineligible due to death or remarriage before age 55. Child-only coverage, while cheaper, pays the annuity only until all covered children reach the age or status where they are no longer eligible, typically at 18 or 22 if enrolled in school. Because SBP annuities receive annual cost-of-living adjustments linked to the same index that governs military retired pay, the purchasing power of the benefit is preserved over time.
The premium structure is designed to be equitable across ranks and pay grades. By using a flat percentage of the elected base, SBP scales naturally with the retiree’s income. A senior officer covering $6,000 of retired pay pays roughly $390 per month for spouse coverage, while an enlisted member covering $1,500 pays $97.50. Both receive an annuity equal to 55% of their chosen base, making the program proportionally fair regardless of retirement pay level. Unlike many commercial insurance products, the government subsidizes administrative costs, and retirees who participate for at least 30 years and reach age 70 are considered “paid up,” meaning premiums cease while coverage continues.
Deciding on the appropriate base amount requires balancing affordability with the desired level of protection. Because premiums and annuities rise together, some retirees opt to insure less than their full retired pay to keep costs manageable. Others choose the maximum base to ensure their spouse can maintain the current standard of living. The calculator allows you to experiment with different base amounts and immediately see how premiums and annuities respond, empowering informed choices tailored to unique family needs.
Another consideration is how SBP interacts with the Veterans Affairs Dependency and Indemnity Compensation (DIC) benefit. Historically, surviving spouses receiving DIC had their SBP annuity reduced by the DIC amount, leading to a “SBP-DIC offset.” Recent legislation phases out this offset, allowing eligible spouses to receive both benefits fully. Nevertheless, understanding potential offsets or tax implications remains important, and consulting a personal financial counselor or the Defense Finance and Accounting Service (DFAS) can provide clarity.
When a retiree elects SBP, premiums are typically deducted automatically from retired pay before taxes, reducing taxable income. This pre-tax treatment lowers the effective cost of the premium. The annuity received by survivors is taxable income, but because it replaces retired pay that would have been taxed, the overall tax impact may be neutral. Our calculator does not address individual tax situations, but knowing that premiums are tax-deferred can help in comparing SBP to private life insurance alternatives.
SBP decisions can be revisited under limited circumstances. Retirees who remarry or whose family situations change may have opportunities to add or drop coverage within specific time windows. Additionally, a one-time “open season” authorized by Congress occasionally allows existing retirees who previously declined SBP to opt in. These periods are rare, underscoring the importance of making a well-considered decision at retirement. The calculator remains useful in such scenarios by illustrating the financial trade-offs of joining or modifying coverage.
Because the annuity is a percentage of the base amount, inflation adjustments automatically raise survivor payments in tandem with increases to retired pay. For example, a retiree with a $2,500 base sees their survivor annuity rise from $1,375 to $1,430 if the annual cost-of-living adjustment is 4%. This built-in escalator provides peace of mind that the benefit will keep pace with economic changes. When planning for long-term spousal support, this attribute distinguishes SBP from fixed, non-indexed insurance products whose value erodes over time.
Finally, while SBP offers significant protection, it may not meet every family’s needs on its own. Some retirees complement SBP with private life insurance or investments to cover debts, college costs, or estate planning goals. The calculator provides a baseline for understanding what SBP delivers so that additional strategies can be layered appropriately. By knowing the premium and annuity in advance, retirees and their spouses can engage in more productive discussions with financial professionals and make decisions aligned with their broader retirement vision.