Let's play a game where you call the flip of a coin. You bet $2.50 each time and the government holds your money. If you win you get $2 back; if you lose . . . well . . . either way you lose!
Only someone who did not understand the rules of the game would keep playing against these odds. Unfortunately, the name of the game is the Survivor Benefit Plan (SBP), and many retirees are playing because they lack adequate information on which to base a decision. There are better solutions than SBP, but the Department of Defense seems reluctant to discuss them.
Little has been published on the subject in Proceedings since the mid1980s and many things have changed since then. It never was feasible to project rates of return at 11.5%. Social Security benefits are now taxable (except the first 15%). Inflation no longer is raging along at 6.5%. But even if all those factors still applied, there would remain reasons for avoiding SBP.
First, some background is necessary. The SBP is a voluntary plan strongly promoted by the Department of Defense (DoD) to protect a retiring military member's spouse should the member predecease the spouse. It comes in two forms: