Exploring Survivor Benefits and Retirement Options For Our Heroes
EXPLORING SURVIVOR BENEFITS & RETIREMENT OPTIONS FOR OUR HEROES
After dedicating decades to serving their country, military personnel face the critical task of planning for retirement. This journey involves making decisions that will shape their financial future and provide security for their loved ones. Let’s explore the stories of three hypothetical retirees—Master Chief Davis, Commander Brown, and Captain Johnson—as they navigate the options of the Survivor Benefit Plan (SBP), self-directed investing, and term insurance.
MASTER CHIEF DAVIS
THE STEADFAST PROTECTOR
Master Chief Davis, a dedicated serviceman with 30 years of service, is contemplating his retirement options. He wants to ensure his spouse is financially secure if something happens to him. The Survivor Benefit Plan (SBP) catches his eye because it offers a guaranteed, inflation-adjusted income for his spouse.
Hypothetical SBP Details:
- Annual Premium: $3,200
- Total Premiums Over 30 Years: $96,000
- Potential Annual Benefit for Spouse: $27,500
Master Chief Davis appreciates the stability SBP provides. Knowing that his spouse will receive a steady income, adjusted for inflation, reassures him. However, he also considers the long-term costs and the fact that if his spouse predeceases him, the premiums paid into SBP are lost.
On the other hand, he explores self-directed investing. By investing the same $3,200 annually with a hypothetical 7% return, his portfolio could grow to approximately $300,000 over 30 years. This fund offers flexibility and can be used for various needs or left as an inheritance.
Hypothetical Investment Scenario:
- Annual Investment: $3,200
- Total Investment Over 30 Years: $96,000
- Potential Portfolio Value After 30 Years: $300,000
In this scenario, Master Chief Davis should weigh the guaranteed income of SBP against the potential growth and flexibility of self-directed investing.
Ultimately, his journey through retirement planning highlights the importance of addressing all aspects of financial security. By working with advisors who can take the time to understand his unique needs and goals, he is able to navigate the plan he chooses with confidence.
COMMANDER BROWN
THE STRATEGIC PLANNER
Commander Brown, with 20 years of service, is also evaluating his retirement options. He is drawn to the Survivor Benefit Plan (SBP) for its guaranteed income but is also intrigued by the potential of self-directed investing.
Hypothetical SBP Details:
- Annual Premium: $4,000
- Total Premiums Over 30 Years: $120,000
- Potential Annual Benefit for Spouse: $33,000
Commander Brown appreciates the security SBP offers, especially if he passes away shortly after retirement. His spouse could receive $33,000 annually, far exceeding the premiums paid. However, he also considers investing the same $4,000 annually into a diversified portfolio with a hypothetical 7% return, which could grow to approximately $380,000 over 30 years.
Hypothetical Investment Scenario:
- Annual Investment: $4,000
- Total Investment Over 30 Years: $120,000
- Potential Portfolio Value After 30 Years: $380,000
In this scenario, by addressing Commander Brown’s concerns about potential income for his spouse versus financial legacy, we can help him transition into retirement with confidence in his financial future.
CAPTAIN JOHNSON
THE TERM INSURANCE ADVOCATE
Captain Johnson, with 25 years of service, is exploring the term insurance option. He values the lower initial cost and the significant lump sum benefit it provides to his beneficiaries.
Hypothetical Term Insurance Details:
- Annual Premium: $2,000
- Total Premiums Over 30 Years: $60,000
- Face Value (Benefit): $1,000,000
Captain Johnson appreciates that term insurance offers a substantial benefit for a lower cost compared to SBP. If he passes away during the term, his beneficiaries could receive $1,000,000, which can be used for any purpose, including paying off debts, covering living expenses, or investing.
THE BALANCED APPROACH
However, he also considers the lack of investment growth and the risk that if he outlives the term, there will be no payout. To mitigate this, he could combine term insurance with self-directed investing. By investing an additional $2,000 annually into a diversified portfolio with a hypothetical 6% return, he can build a financial cushion over time.
Hypothetical Investment Scenario:
- Annual Investment: $2,000
- Total Investment Over 30 Years: $60,000
- Potential Portfolio Value After 30 Years: $158,000
This mixed approach can allow Captain Johnson to provide immediate financial protection for his loved ones while also building an investment portfolio for future needs or as a legacy.
In this scenario, Captain Johnson should weigh the potential for growth versus the additional annual investment. Either way, we can assist him in finding a balance between enjoying the fruits of his labor, hedging against unforeseen events, and planning to leave a lasting legacy for his loved ones.
The stories of Master Chief Davis, Commander Brown, and Captain Johnson illustrate the diverse paths military retirees can take when planning for their financial future. Each option—SBP, self-directed investing, and term insurance—offers unique benefits and challenges. By understanding these options and talking with our team, retirees can make informed decisions that best suit their needs and goals.
As you embark on your retirement journey, consider the experiences of these retirees and choose the path designed to provide the security and flexibility you desire for yourself and your loved ones.
For more information on these options check out our Military Retirement SBP module which goes more in-depth into your potential options!
The foregoing case studies are for illustrative purposes only. Individual cases will vary. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Borza Wealth Management Group and not necessarily those of Raymond James. This information is intended to be educational and is not tailored to the investment needs of any specific investor. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Diversification and asset allocation does not ensure a profit or protect against a loss. Forward looking data is subject to change at any time and there is no assurance that projections will be realized. Prior to making any investment decision, you should consult with your financial advisor about your individual situation. Life insurance policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company.
