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Retirement / Separation Considerations


Jughead

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So Finance took my retirement/sep package, signed off my outprocessing and issued my Terminal Leave #.  Then did nothing.  Literally... nothing.

Just happened to find out that no record of my retirement existed in the finance system while inprocessing for a new GS gig I've started at the local base (thanks to a solid NCO at the desk I just happened to be chatting with).  This was two days prior to my official separation date.  Now trying to unfvck from my gmail address with my previous servicing finance office.  Not fun.

Had I not happened to find this out due to my new job I wonder how long I would have been waiting and wondering about my final pay and retirement pay starting.

Anyway, don't trust the signed off checklist.  Stay on these guys when you separate.

zb

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1 hour ago, zach braff said:

So Finance took my retirement/sep package, signed off my outprocessing and issued my Terminal Leave #.  Then did nothing.  Literally... nothing.

Just happened to find out that no record of my retirement existed in the finance system while inprocessing for a new GS gig I've started at the local base (thanks to a solid NCO at the desk I just happened to be chatting with).  This was two days prior to my official separation date.  Now trying to unfvck from my gmail address with my previous servicing finance office.  Not fun.

Had I not happened to find this out due to my new job I wonder how long I would have been waiting and wondering about my final pay and retirement pay starting.

Anyway, don't trust the signed off checklist.  Stay on these guys when you separate.

zb

At least a month since your final paycheck is held for a full pay period to conduct an audit. 

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17 hours ago, di1630 said:

Im leaving AD for the reserves, how long do I have for my moving allowance to HOR?

One year. You can request extensions in 6 month intervals up to three years, but those requests aren’t guaranteed to be approved.

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If Clark keels over day 1, then SBP assuming you've selected your full salary as the "base".  The Mrs. would get recurring income for the rest of her life & you will not have paid a bunch of SBP premiums.

Moving away from the day 1 scenario, at what point do you think you'll have enough invested to permit your family to handle all the debt/goals etc. without any additional income?  If that's today, then maybe no insurance policy is the way to go.  If it's in the next 20 years when you're both pushing 60, then maybe 20 years is the relevant timeframe to look at SBP vs. a term policy.

Full disclosure, I ended up selecting SBP.  YMMV.

 

 

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If Clark keels over day 1, then SBP assuming you've selected your full salary as the "base".  The Mrs. would get recurring income for the rest of her life & you will not have paid a bunch of SBP premiums.
Moving away from the day 1 scenario, at what point do you think you'll have enough invested to permit your family to handle all the debt/goals etc. without any additional income?  If that's today, then maybe no insurance policy is the way to go.  If it's in the next 20 years when you're both pushing 60, then maybe 20 years is the relevant timeframe to look at SBP vs. a term policy.
Full disclosure, I ended up selecting SBP.  YMMV.
 
 

Same is true if you keel over the day after buying life insurance.


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1 minute ago, CaptainMorgan said:


Same is true if you keel over the day after buying life insurance.


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The fact you get paid is the same, but they differ in form.  The SBP is for life vs. the term one-time payout.

I guess I could do the math on the NPV of the annuity vs. the term, but I didn't go that far.  

Your point is well-taken. 🍻

 

 

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A few of us retiring at the same time did spreadsheets to try an educated decision.  SBP is subsidized and if you go looking for a similar annuity on the market, SBP is a big bargain; can't find anything close in value for the cost.  I can't remember the age data point exactly but well into retirement, if you keel over, the amount of time to recoup SBP premiums in monthly payments to the Mrs was like 3 years.  Stats say men die 1st.  So all the Mrs has to do is outlive you by 3 years.  But consider family history.

The main point about insurance, and trying to live off of it by either planning out living off the interest of investing it and/or dwindle down to Mrs's death, is you gotta die.  No die, no insurance.  And hope investments work out.  Nothing like a Musk tweeting about clouds to send the market into a nosedive... dick. 

Also, term for this kind of coverage gets expensive in old age.  The goal of SBP (or the insurance route) is the Mrs has steady monthly income and along with SS and investments like IRAs (hopefully), etc., doesn't have to worry about money.  I view term as gap insurance to retirement, when hopefully the big items are paid off like house, college, boats, divorces, etc.  Also, civilian jobs post retirement might offer a nice insurance deal to add to the mix. 

So, we all picked SBP.

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14 hours ago, Clark Griswold said:

Probably already asked 69 times but SBP or a term life policy for wife and kids if Clark Griswold keels over day 1 into retirement?


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Everyone's favorite...it depends.

BLUF: Maybe get a quote on what the Term would cost you and compare that cost to what you'd pay in SBP reduction of your check. The SBP type coverage is usually very costly. If a comfortable Term amount costs less than the SBP, you might be better off with that route.

Obviously when you keel has a big piece, but that's uncontrollable. The controllables that will make the biggest variations are: what are your other retirement/rainy day savings, spouse/heirs' income needs, your spouse's income earning potential, and what are your costs for a Term Life policy that would cover your family's needs?

The last big one that is sometimes hard to ask and the most important...what is your spouse's FINANCIAL APTITUDE? Would they have the wherewithal to smartly invest a lump sum that a Term policy would pay out vs are they not great with money and be better off with an "allowance" that the SBP would provide? If the former, the Term life is usually a much better deal (depending on your insurability) and, if the latter, it's probably better to go for the SBP.

I am trying to avoid going deep down the rabbit hole of the above questions, because it gets convoluted and focused on each individual scenario, but 96.69% of the time it's better to get the Term policy (*depending on your insurability/health and what that Term policy costs) over the SBP. Pensions take a pretty costly bite out of what your full monthly benefit would be to act as your "insurance." You are usually much better off to take the higher monthly payment and INVEST the difference between that payment and what your reduced SBP would be in an IRA (if you're continuing working) or even just using it to pay the Term policy costs, but that requires discipline and also ties great into your spouses' money handling capability asked about in the paragraph above.

Lastly, one big further positive to the Term vs SBP: The Term payout is tax free; the SBP is (likely) going to be taxable income. Again, if your spouse is capable of managing a large sum of money showing up, the Term payout could grow to quite a nest egg for her later years. If she's gonna use it to buy a new boat/big house/diamonds/new gardner/whatever, it might not be the best option.   

FWIW, I am basing a lot of my knowledge on pension options off of my civilian equivalent of an SBP (albeit, they're all basically similar calculated annuity contracts) and I was never AD, so I do not know if there are major differences with the AD Mil SBP. That said, generally, it is usually way more costly to "pay" a pension to act as your insurance over purchasing a Term policy. YMMV, of course. 

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For the Reservists/Guardsmen in the crowd, you can hedge your bets and take the full SBP benefit payout if you die from when you stop serving until two years after starting retirement pay and then cancel it. You have one year to cancel SBP from the two-year anniversary of starting retirement pay (see below). To me, this seems like the best bang for your buck because you will only pay for two years of SBP and still be covered (if you die) for multiple years depending how big the gap is between when you stop serving and when you start collecting retirement pay. Once you cancel SBP within these limitations, you can then rely on more economical options such as term life insurance as required.

-Survivor’s Benefit Plan (retirement annuity) law (https://uscode.house.gov/view.xhtml?path=/prelim@title10/subtitleA/part2/chapter73&edition=prelim): 10 USC Chpt 73 (BLUF: you can cancel SBP for a one-year period after the second anniversary of when retired pay is received. See “Stopping or Changing Coverage” bullet #4 at: https://www.dfas.mil/retiredmilitary/provide/rcsbp/)

--Para 1447 6(B): Full amount under reserve-component annuity.—In the case of a person who would have become eligible for reserve-component retired pay but for the fact that he died before becoming 60 years of age, such term means the amount of monthly retired pay for which the person would have been eligible—

(i) if he had been 60 years of age on the date of his death, for purposes of an annuity to become effective on the day after his death in accordance with a designation made under section 1448(e) of this title;

--Para 1448a: Election to discontinue participation: one-year opportunity after second anniversary of commencement of payment of retired pay

(a) Authority.—A participant in the Plan may, subject to the provisions of this section, elect to discontinue participation in the Plan at any time during the one-year period beginning on the second anniversary of the date on which payment of retired pay to the participant commences.

(b) Concurrence of Spouse.—

(1) Concurrence required.—A married participant may not (except as provided in paragraph (2)) make an election under subsection (a) without the concurrence of the participant's spouse.

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Great advice, I've priced out some TL policies in addition to what I have now, probably gonna go with SBP but keeping in mind that it is not necessarily permanent 

Inflation is what is keeping me interested in SBP more than anything else but prices on 7 figure TL policies are still beating SBP, I think it just depends how long we are gonna be experiencing inflation rates we have been for the last year, 8-10% inflation year after year will wear down even a mil to a mil and half benefit

Edited by Clark Griswold
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