The Survivor Benefit Plan (SBP) is the default life insurance that covers military veterans’ pension payments for dependents. Subsidized by the federal government, it has a positive expected net pay out and receives widespread praise. It's important to recognize the timing of expected SBP payouts and their marginal contribution to other retirement savings. We offer an alternative analysis that casts doubt on whether candidates should select SBP and present an easily implementable alternative. We show that specific financial needs, actuarially correct life expectancy, moral hazard, and taxes all play important roles in choosing whether to enroll in this program.
Author(s): Brian C. Payne, Thomas C. O'Malley, Jr, Ph.D., William W. Jennings, Ph.D. CFA CGMA, Jeffrey C. Merrell, Ph.D.
