November 8, 2021

What Are Retired Military Spouse Benefits After Death of A Veteran?

A surviving spouse who wants to make sure they won't have any financial problems if their active duty veteran dies should be aware of the retired military spouse benefits that are available.

- There is a death benefit military members can receive upon the death of their service member spouse.

- This death benefit is in addition to other retired military spouse benefits that may be available.

- It's important for surviving spouses to understand what these benefits are if they will be enough to cover needs and lifestyle.

As one of our co-founders at US VetWealth has been a Goldstar daughter since losing her father when she was only 10 years old, we have a distinct viewpoint on this difficult issue. Unfortunately, her family was not financially equipped to deal with this tragedy.

Eligible Monthly Payments For A Deceased Service Member Aren't Enough

In the pre-9/11 era, when this occurred, the active-duty death benefits for a surviving spouse were insufficient. While overall compensation has improved for eligible survivors, many gold star families are still shocked at how little they receive in comparison to what they would have received in retired pay had there not been an early death.

We need to face the reality that the Government accounting office knows it saves money when a Veteran isn't alive very long. Sorry, but that's the truth.

It's the same problem we see with Social security. The payments made today are for a future promise. But there is nothing of stored value with your name on it. Payments for today's retirees come from today's new social security taxes on workers. If they live too long, there isn't enough new Soc. Sec. taxes to pay for it.

The Social security system was designed when they only expected retirees to live a couple of years past retirement. Life expectancy was only 65! We are living longer and prices are going up.

These problems are no different when it comes to how a military pension and the veteran's death benefits work.

The only way to ensure you have a proper death gratuity is to design a personalized strategy in the unlikely event of the service member's death.

What active-duty families need to know about surviving spouse military benefits

Military spouses who want to make sure they won't have any financial problems if their active duty veteran spouse dies should be aware of the available death benefits.

A widow of an active-duty service-member may be entitled to death benefits from the Defense Department if the death occurred on active duty. To qualify for death gratuity, a surviving spouse must generally be married to the service-member for at least one year before death or have children with that person.

If service-member dies while serving on active duty, death benefits may be paid to the spouse and minor children that could include:

- A lump sum death gratuity

- Death compensation pay for all dependents of active duty service members subject to death in service or death from injuries received in a combat theater of operations.

There are some death benefits payable to a spouse or children

guaranteed death benefit

How much money does a widow of an active-duty soldier get?

Servicemembers Group Life Insurance

The maximum available SGLI death benefit is $400,000.

Services Members Group Life insurance offers low-risk coverage for service members who are active duty, reservists, or members of the National Guard.

For death during active service, this death benefit pays the full face amount of the contract to an eligible beneficiary, tax-free.

What is Dependency and Indemnity Compensation?

Dependency and Indemnity Compensation (DIC) is a tax-free monetary benefit payable to eligible survivors of certain Veterans. The base monthly amount is $1,437.66 for all surviving spouses. There are a number of factors including children, VA disability, etc. that can increase that amount substantially.

To learn more about DIC visit the VA website for 2022 updates.

Who is an eligible beneficiary?

Spouse (including common-law spouse); children; parents; siblings; nieces/nephews; grandparents; stepparents or stepchildren and their descendants. A "child" may be the natural child, legally adopted child, stepchild, grandchild or any person for whom you designate.

Be Informed About Veteran Spouse Benefits

What spouses of career military need to know about military retired pay

For decades many were let to believe there was only one option to provide death benefits for spouses of veterans, the SBP.

The SBP benefit is a form of life insurance paid as an annuity that is designed to provide a basic level of support in the event a retired veteran predeceases their spouse. It is offered without qualification to all retiring veterans.

Rather than paying out a lump sum to the beneficiary like most life insurance policies, it pays a portion of the deceased veteran’s retired pay each month, for the remainder of the surviving spouse’s life. 

What You Probably Don’t Know about the Survivor Benefit Plan (SBP)

Unfortunately, it is characteristic of the optional SBP payments that it is not always elected as the result of a thoughtful and informed decision. Many modern military retirees and their families don’t learn about the SBP annuity until they are twelve to eighteen months out from their separation from active duty, and few retiring military members investigate alternate options for financially protecting their families.

The SBP is briefed as part of the military retirement program, and there is little to no guidance given regarding privatized options on the free market. About 80% of career service members end up taking the SBP.

This is a good thing for the government; because much like social security, the continuity of the SBP program depends upon each succeeding generation paying their own SBP premiums into it.

Why you May Decide to Decline SBP Coverage

During your retirement briefings, the SBP coverage is presented as a no-brainer for retiring service members and their families, but the program has some drawbacks that some military families find shocking:

  • The SBP is the same for everyone and costly—6.5 percent of the pension, which is automatically deducted from your military retirement paycheck. Despite its steep price, there's little chance a retiree's surviving spouse (or a minor under 21) will ever receive a positive return on investment beyond what is paid into it.
  • The SBP payments are only 55% of the veteran’s pension to the surviving spouse.
  • When eligible surviving spouses die before the service member, no benefits will be paid (and no refunds given). This is worth considering in instances where there is a large age difference, the spouse is incapacitated, or the service member is female (statistically, women live longer than men).
  • The SBP is a one-time, irrevocable choice that must be made at retirement or within a year of a significant life change, such as marriage or parenthood. You must enroll within a certain period of time, and once you do, you are obligated to pay premiums for the rest of your life. [The only window to leave SBP is between the 24th and 36th month after retirement]
  • The SBP does not offer any cash value or return on investment while the insured retiree is still living.
  • The SBP only pays out if the insured retiree dies before the surviving spouse.
  • Children are over 21 cannot be beneficiaries. If the spouse dies at any point after the retiree, if all children are over the age of 21, SBP payments stop.
  • The processing time to receive SBP benefits is significantly longer than the processing time for other life insurance for military products.

The Costs of Veteran Survivor Benefits

What nobody tells you during your retirement briefings about death benefits for a surviving spouse is that in the long run, the amount of money the beneficiary receives from the SBP annuity is usually considerably less than what the monthly premium amounts could have generated as investments and insurance in the private marketplace.

The ONLY way that it makes good financial sense to elect SBP coverage, with regards to ROI, is if a service member dies within a few years of retiring.

Podcast logo - The Spouse Benefit Plan

Click the Logo Above for more info about the Spouse Benefit Plan

A Better Military retiree Retirement Pay Protection Strategy

US VetWealth's spouse benefit plan gives military spouse more income protection and flexibility than the SBP annuity. The program is a voluntary, private insurance plan that service members can design instead of the SBP coverage.

Unlike the SBP, US VetWealth works with the nation's best insurance carriers so that any death gratuity payment pays out to immediately upon the death of the insured veteran, with no waiting period required.

Plus, there are no premiums to be paid for as long as you live - so if you should ever need it, your loved ones will receive 100% of your policy face value. And unlike SBP, US VetWealth allows beneficiaries to continue receiving payments after the death of the service member or retiree. So if you're looking for better-of-mind and more options in protecting your income, US VetWealth is the way to go.

- US VetWealth insurance benefits are paid directly to the beneficiary after death of the service member or retiree. Beneficiaries can be changed and updated to ensure a legacy.

- SBP coverage can be turned down at retirement but once coverage is elected it must be continued for life. The US VetWealth Spouse Benefit plan premiums are completely flexible.

- US VetWealth provides a simple design to allow the service member or retiree to determine how much coverage they need based on the maximum death gratuity payment from the government.

Get Our Best Free Books & Webinars

Sign up to get your free eBook on [topic] sent straight to your inbox.

You may also like

April 13, 2020

The Best New Life Insurance for Veterans

October 10, 2019

6 Steps To Avoid Military Spouse Unemployment

April 22, 2020

Is SBP Worth It? 9 Military Survivor Benefit Plan Shortfalls

June 8, 2020

Life Insurance For Military Retirees: How to Prepare for the Unknown

April 28, 2021

How to Benefit From Modern Life Insurance Innovation

January 8, 2022

Is VGLI Life Insurance Enough to Protect Your Military Pension? [E7 Case Study]

take an opportunity to be different