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(As printed in the Dec 2001 AUSA Magazine)
Military Family's Survivorship Planning
Government Survivor Benefits, Part I
CSM (Ret) Keith R. Miller, CLU, ChFC
This is the first in a series of articles to summarize key elements of military survivor benefit programs to include Social Security, Department of Veterans Affairs (VA), and the Uniformed Services Survivor Benefit Plan (SBP) benefits. Look for follow-on articles in coming issues.
Government legislation in recent years has resulted in a number of improvements to benefits for military professionals, retirees, and their families. Increases in VA benefits and entitlements, SGLI enhancements, reduced VGLI insurance rates, Tricare for Life, Tricare Senior Pharmacy Program, Retiree Delta Dental insurance, and several others have bolstered our confidence in our law makers and their recognition of the many sacrifices willingly made by our servicemen and women. While some believe the increased benefits are a restoration of promises made years ago, the changes, nonetheless, are welcomed by all of us and we are appreciative that AUSA has been instrumental in this success. Yet how many of us actually keep track of these benefits and how they apply to us individually?
For instance, does every soldier know what happens in the event of his or her death on active duty? What survivor benefits are entitled to their family members and what life events affect the amounts received? How does one apply for these benefits? Does every retiree understand the integration of the military SBP with the social security entitlement for the survivor? When and how does VA Dependency and Indemnity Compensation (DIC) integrate with SBP? These are complicated issues that are difficult to explain and even more difficult for survivors to understand at a time when their emotional state is already stressed and fragile. The military professional does a great service to his or her family by taking the time to learn and explain these entitlements to their loved ones.
The cornerstone of any survivor sustainment plan is the unique set of benefits afforded the families of servicemen and women. Rarely does the civilian workplace provide survivor benefits that come close to the benefits afforded to the survivors of military personnel and for good reason. Our nation expects extreme sacrifices on the part of our service personnel and, in return, promises generous entitlements to those who survive them. Primary sources of the benefits are Social Security, Survivor Benefit Plan (SBP), and Veterans Affairs Education Assistance and Dependent Indemnity Compensation (DIC). A soldier's status and years of creditable service at the time of death determine which entitlements are due as does the age and status of the survivors. Knowing what these benefits are at a given point in one's career can facilitate developing very specific planning objectives by integrating the government benefits with life insurance, savings, and investments. The overriding goal is to ensure the surviving family's needs for living expenses, children's education, and lifetime support for the surviving spouse are met.
How is this accomplished? By calculating the benefits currently entitled one can begin to determine the difference between what is desired and what is available to meet the needs. Suppose a soldier sat down at the kitchen table and figured out a need for a monthly income of $3,500 to cover living expenses, education savings, and retirement dollars for the surviving spouse and two minor children. If the soldier knew for certain that the spouse and children would draw $1,369 per month tax free from the VA in the form of DIC payments and another $1,500 from Social Security (combined amount for spouse and children) and that each child would receive $588 per month for education at age 18, he or she could then determine the additional amount of income required to meet the family's monthly needs.
Of course, the time value of money must be considered as well as projected inflation rates. Using dollars in today's value is a good starting point for initial calculations. From this point, the soldier need only compute the value of existing insurance and savings to determine if the surviving family's needs were adequately funded. The difference is what we call the "unfunded requirement." If the soldier had sufficient years of service to also qualify for payment of the SBP, then the unfunded requirement may be even less.
What does this exercise accomplish? Most importantly, it provides a snapshot in time of the family's overall survivorship plan and highlights shortcomings. It also helps avoid buying more insurance than necessary and focusing on the importance of a regular savings and investing plan for multiple goals. Without considering the specific value of government benefits, the tendency would be to over-insure, or worse, to do nothing out of concern for affordability. Neither course is desirable.
Future articles in this space will cover the "basics" of VA survivor benefits, Social Security benefits, the military SBP program, and the integration features along with discussions of methods of covering the "unfunded" requirements.
Editorial note: The author is currently VP and Chief Operating Officer for the Armed Forces Services Corporation located in Arlington, VA. He culminated his military career in 1996 with assignment as Command Sergeant Major of the Department of the Army Personnel Command (PERSCOM) in Alexandria, VA.
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