Retired Veteran Annuities
Since the days of our founding, military veterans have been considered one of our country’s true treasures and a reminder that men and women have unselfishly served to protect the liberties we cherish. Veterans benefits have been a part of the country’s way of thanking those who serve since the Revolutionary War and, in 1930, the Department of Veterans Affairs was established to ensure that the care of our veterans was provided in the most effective and efficient manner possible.
As part of the benefits that veterans receive, retired veteran annuities became the basis for ensuring that they received a secure retirement income commensurate with their length of service. Applying a formula based on pay grade and length of service, retired veterans receive a guaranteed income for the remainder of their life. Veterans with 20 years of honorable service receive 50% of their monthly base pay. Veterans with more than 20 years also receive an incremental increase of 2.5 percent for each year served beyond 20 years.
For the 20 year veteran, there’s the peace of mind of a government backed retirement annuity that will provide a stream of income that can’t be outlived. It offers a solid foundation of income upon which he or she can continue to add additional security through savings. A veteran who retires from the military in their 40’s or 50’s has the ability to still earn a lifetime of income that can create additional retirement assets. The planning opportunities are limitless.
Perhaps the biggest consideration for a retired veteran is to ensure the protection of family members who would be dependent on the retirement annuity income. When a retired veteran dies, the annuity stops paying their monthly income. Survivor benefits are available through a Survivor Benefit Plan. The SBP is designed to protect surviving family members against the loss of income in the event of the early death of the retired veteran. It also provides protection in the event the surviving spouse outlives the retiree.
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Survivor Benefit Planning
When a veteran retires, the SBP for family members is activated at the time his retirement annuity begins making payments. There is a cost to participate in the SBP which is deducted from the annuity payments and it is based on the selected benefit level or base amount. The surviving spouse will receive up to 55 percent of the base amount as a survivor benefit. Any change to the SBP needs to have the spouse’s approval.
There are some planning considerations as the SBP allows for coverage of different kinds of beneficiaries such as a spouse, a former spouse, dependent children, and any insurable interest. Spouses are covered as long they were married to the retiree at the time of enrollment in the retirement annuity or for at least a year prior to the retiree’s death. Former spouses are eligible for benefits until they remarry. If a former spouse reaches age 55 and remains unmarried, he or she is eligible for survivor benefits.
Dependent children are eligible to receive benefits in a number of ways. Children will receive benefits that were designated for a surviving spouse if he or she dies while they are still dependent (Through age 18 or age 21 if in college). Children can be designated as the sole beneficiary as long as the spouse is willing to forgo the benefits and concurs with the designation.
Coverage is also available for any insurable interest of the retiree. For instance, a retiree without a spouse or dependent child may designate a business partner as a beneficiary where the partner would suffer a financial loss without the services of the retiree.
Government backed retired veteran annuities are solid in their promise to our men and women of the armed forces that their sacrifice will be rewarded. As with any retirement annuity, with its guarantee of lifetime income, it forms a crucial cornerstone of a retired veteran’s future financial security. Planning for the survivors’ benefits should be an important consideration at the time of enrollment and at any time there is a change in the family situation.
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