Retiring from the military means a stack of forms. Two choices inside that stack deserve a slow read with your spouse. One is the Survivor Benefit Plan. The other, for members under the Blended Retirement System, is the lump sum option. Both are set when you retire.
How the Survivor Benefit Plan Works
Military retired pay stops when the retiree dies. SBP is the way to keep part of it going to a surviving spouse. While you are on active duty, this protection comes at no cost. The election you make at retirement decides whether it continues.
You choose a base amount, anywhere from $300 up to your full retired pay. If you die first, your spouse receives 55 percent of that base amount for life. Both the base amount and the payments generally rise with cost of living adjustments.
For spouse coverage, the premium is generally 6.5 percent of the base amount. Premiums are not counted in your taxable federal income, so the real cost is lower than the line item. Once you are 70 and have paid premiums for 360 months, coverage is paid up and premiums stop.
Why Your Spouse Signs Too
Full spouse coverage is the default. If you want reduced coverage, child only coverage, or no coverage at all, your spouse must agree in writing.
A few facts help frame that talk:
- A surviving spouse who remarries after age 55 keeps SBP payments for life.
- If your spouse dies first or you divorce, premiums stop once you notify DFAS.
- SBP payments to a survivor count as taxable income.
If you want a local view on how these forms fit an Arizona household, here is a guide to SBP and BRS decisions for military retirees in Arizona.
The BRS Lump Sum Option
Members retiring under the Blended Retirement System get a second choice. BRS uses a 2.0 percent multiplier per year of service, compared with 2.5 percent under the legacy High-36 system. So 20 years under BRS equals 40 percent of your retired pay base.
BRS makes up some of that gap while you serve. It adds Thrift Savings Plan contributions: 1 percent automatic, plus up to 4 percent more in matching.
At retirement, eligible BRS members can take a discounted lump sum worth 25 or 50 percent of their future retired pay. In exchange, monthly retired pay is cut by that same share until full Social Security retirement age, which is 67 for most people. After that, full monthly pay returns.
You can take the lump sum all at once or in equal yearly payments for up to four years. The Defense Department discounts it to present value using a rate it publishes each year. That discount is why the lump sum is smaller than the total monthly pay you give up.
The lump sum is entirely optional. If you do not elect it, you receive full retired pay. Keep two other points in mind. VA disability compensation may be reduced if you take the lump sum. National Guard and Reserve members must notify their service at least 90 days before retired pay begins.
Look at Both Choices Side by Side
These two choices land on the same household budget. SBP protects your spouse’s income after you are gone. The BRS lump sum lowers your monthly income for years in exchange for cash now.
Ask a few plain questions before you sign. Could you live on the smaller check until 67? Would your spouse be secure without your retired pay? What would the lump sum actually pay for?
Your retired pay paperwork, DD Form 2656, is where the lump sum election is made. Read it together before either of you signs.
The Defense Department lays out costs and examples on its SBP spouse coverage page. Start with those numbers, then sit down together and decide.