E89 - Should You Opt Into The Military Survivor Benefit Plan? (It Depends)

Should I elect full SBP or not?

The quote worst case scenario here financially speaking

is that you live a long life.

Every dollar we pay into this,

it goes into a government and system,

and it disappears.

We can't access it, we can't ever get it back.

Do you have a $2.5 million Rolls Royce engine

that's giving you this 100% VA disability tax free for life?

When we're talking about SBP,

we're inherently talking about...

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Good morning to you, brother.

Afternoon where I am.

Good morning.

Yeah.

Yeah.

Seems like it's been a few weeks since I've been on

a lot of stuff happening.

But yeah, here we are in a lot.

What's that?

That's it. You're a busy boy.

Yeah, I've been busy.

Yeah, a lot of stuff happened in the world right now.

We're in the middle of this Iran attack

and the markets are nuts.

Everything's crazy.

But that actually is a good point

for what we're going to talk about today.

Because what we're talking about today

is going to be survivor benefit plan for the military.

I had a couple of questions on it just in the last couple weeks

and sort of did a really deep dive into it

to talk about what the best options are.

And there's really not a clear cut case for everybody.

But sometimes it makes sense.

Sometimes it doesn't make sense.

It depends on where you've positioned yourself.

Up to this point in your career, how old you are

and what your outlook is as far as survivor-related death.

I mean, excuse me, as far as service-related death.

Yeah, it's a good topic

because it's something that anyone who gets through

the 20 years and gets the pension

is going to be thinking about.

I obviously myself did not make it to 20.

And so it's not something I personally dealt with

though when I was on that ship in Virginia,

I did a few analysis for guys that doesn't make sense

for me and I've limited knowledge.

I know what it is.

I've done an analysis where I ran through the timeline

of the numbers at what point does it make sense?

If you die in this period, here's the value

and then here's the point where it becomes a net negative.

If you live this long as the individual with a pension.

So it's kind of turning this pension into an annuity effectively.

And then we have a lot of comparisons to life insurance.

And I'd say most of our clients and audience probably

tends towards I'd rather accomplish the same goals

using properly structured whole life.

But there's a lot of folks that just want to see

in a vacuum as this makes sense for me to do this SPP

because it's a decision you're going to have to make.

And if you're not well read on it, you might make

a sub optimal decision.

So Brian's been studying it a lot more

and being in a position where you will have a pension one day,

you're going to have to make this decision

and is it worth it for you?

And so we'll talk through that and let Brian

kind of kick off some of what he's been studying for it.

Yeah, and so for anybody listening, this completely scales.

I mean, if you're an enlisted retiring member,

you're an E7 or all the way up to O6, O7, it doesn't matter.

The numbers will scale based on your inputs.

So what I ran here, and the reason I say that

is I don't want to scare somebody away

who's a different rank, higher rank, lower rank,

I just use the numbers that I'm going to be looking at

as a looming retirement here relatively soon

at the O5 level.

So I ran those numbers because I wanted to,

really what this came down to is I was doing a self study

as well as preparing something to talk about

and be able to talk to other people about this.

So this is a personal analysis as much as it is,

which I could talk about my personal numbers

and why I'm going to choose what I'm going to choose as well.

But yeah, it's going to be based on, you know,

for Air Force, Lieutenant Colonel,

for O5 retirement for military.

But don't run away if you're retiring

at a different rank or a different number of your structure,

the numbers just move comparatively.

Yeah, so just starting off, like when you look at that,

I know you said you didn't get to 20 years,

what do you do, 14 hens?

Yeah, about 14 and a half.

So I separated, but I don't have,

I never had the option for the pension.

I was in the class where I was in that time period

where I had the option to switch the blended retirement system.

And at the time, I said, well, I'm a shoe and for 20,

I'm definitely going to make 20, you know,

I've got a great career.

So of course, I'm not going to opt in for a lesser pension

where you go from 50% to 40% on the pension side

in order to, with hindsight,

I should have done the blended retirement

because who I did not foresee the events

of the last five years, totally derailing that retirement.

I'll be a few years away from that 20 year mark now.

But yeah, so I did not, this was never in the cards

for me to have this decision point.

So let's hit what, you know,

what your background is with the military.

That's even another change.

You know, it's funny you threw that kink in there

because I didn't think about the blended.

And I was, you know, my, because I didn't take it,

I was far long enough my career made no sense.

So on the 40% basis for the, for the base pay

that that changes the metrics even more

and you really should analyze this even more deeply.

We're just going to stick with what we've kind of prepared.

But yeah, if you're in the blended retirement system

planning retire, you're going to have a lower base pension,

which means a lower survivor benefit plan.

So it's even a bigger impact, considering you're making

the same money throughout your career.

So for those folks, if you're young, especially, you know,

you're let's, let's say the 10 year mark

where most people are making that decision, like,

should I stay or should I go?

You might want to start thinking right now

if you're choosing to stay about starting a whole life plan

so that you're ahead of the game.

And I'll show you why that's important with numbers here.

But what it really comes down to is a lot of our clients

are at the, I'm retiring soon.

I'd say so many of our clients are within a year

or post retirement by one year in that ballpark.

And those people are almost going to all be

the old legacy retirement system

where it's 20 or nothing, you get 50%.

I say now, I don't know when the cut off was.

I was in the window where you could choose.

I think you were too.

But at a certain point in the last couple of years,

anyone joining didn't have a choice.

You're going to be in the bread retirement system.

And so I'm guessing here, but I would say that anyone

who's in the, I was forced to do the blended retirement system

has at least 15, maybe 12 years

until retirement anyways.

And I think that if that's your situation,

you can put yourself in a situation to where

you don't really need to worry about this

because you can optimize so much better.

We're talking about the decision point of you're at 20.

You're starting, you know,

if you're going to make a comparison to a whole life policy,

how can you, how can you achieve the same goals

possibly more optimally with a whole life policy?

Well, you're 12, you got a 12 year jump on this,

you can certainly do it.

It's not even, it's not even going to be

a hard decision for you.

And so think about that, understand what the SPP is,

understand what you, the decision you will be making

in the future, but also know that if you start right now

and give yourself the head start with the whole life option,

it won't even, it'll be a no brainer down the road.

All right, so yeah, that's absolutely true.

And actually, the first case we'll look at

is a 42 year old O5, 20 years in service,

starting whole life now and what that metric looks like.

So it's perfect for those people that are at the end too,

but so the really, you know, the question

that everybody faces whenever they get to this

is should I elect full SPP or not?

And most people only look at that

as a metric of full SPP.

They don't even analyze, should I do a partial

survivor benefit plan.

But and most people, what do they, what do you think they do?

They get, they get handed this paperwork at retirement

at their 20 year mark or when they're ready to walk

and they go, do you want survivor benefit plan?

Typically it's somebody in the financial realm

or whatever you guys call it the Navy.

For us, it's, it's like MPF and they just give you

this choice, yes or no, even though that's,

there's a big gray area between.

So most people in the hurry haven't really studied it.

They default to yes, it's, yeah, yeah,

I want to make sure my wife's taken care of.

And I respect that, but it's not always necessarily

the best thing and it's not a scam.

Like what SPP is before we jump into it

is just like an annuity that has no asset value.

So you're going to pay a certain premium for 30 years

or till age 72, whichever one comes later.

Should you die before your spouse,

she's going to get a percentage of your base retirement pay

for the rest of her life and then it ends.

So there's nothing left over.

So we'll talk about some problems with that too,

but it's absolutely not a scam.

It's just not the only option.

So let's look at, like how it works.

If you choose the yes, you say I'm going to get

100% of a retirement pay.

It's a 6.5% charge for 30 years or till 70 like us.

But 72, I'm sorry, I said 72,

because I'm putting 30 and 42 together

for that 20 year retiring officer.

It's 70 years old.

So let me make that correction right now.

30 years or age 70, whichever is longer.

And when you're saying 6.5%, you said earlier,

you pay a fee to opt into this option

where if you die the pay continues

or a portion of the pay continues for your spouse

after you pass.

But when you say fee, really, it's basically just

do you want your full pension

or do you want a reduced pension effectively?

The net of that.

Well, that's a premium.

So if you look at your entire pension

for easy numbers, say it's $10,000.

I don't think many people get that amount

less than like a general officer.

So let's just say it's $10,000.

They're going to take 6.5% of that.

Every month as premium for the survivor benefit plan.

And that's just a graduated number.

If you elect 100% of your retirement pay

as the base amount that they're going

to take the premium off of.

So in exchange for that, your spouse

will get 55% of your base pay.

So using those easy numbers again,

if it was $10,000, he or she is going

to receive $5,500 a month once you die if you die first.

And you're going to pay $650 a month for that

for 30 years, or until age 70, whatever comes first.

Make sense?

Yep.

So $650, my options are either just

to A or B, simple options.

I can collect $10,000 and again, like you said,

we're going to use $10,000 because it's easy math.

It's easy to remember.

Higher than most people are going to get.

But option A, I choose to opt out of SBP

and I get $10,000 a month as my pension.

And when I die, that pension dies with me.

Or option B, I get my $10,000.

I pay $650 a month if I die in this time frame,

then my wife gets $5,500 on going as long as she lives

until she dies, okay.

So those are two options.

So to actually put some numbers on this,

crazy computer.

So for me, like this is just an approximate number.

And this is going to range because everybody knows

that's in the military when you retire.

Like it's going to be based on the average three.

So it depends on what your pay grade was during

if you pinned on early, if you pinned on late,

if you max the scale out.

So I just picked approximately $5500 a month

for an O5 retirement.

It's not perfect.

But that would make my retirement

if that were the exact number $66,000 a year.

If I elected the full 100% Survivor Benefit Plan,

I'm going to pay 6.5% a month on that,

which comes out to 357 and 50 cents per month,

which is what's that, $4,290 a year I'd be paying.

And if I have to pay that for 30 years,

the total cost is 128,700.

All right, so the benefit upon my death,

or if I die before my wife,

she's going to receive 55% of this $5500 a month.

So she's going to then receive $3,000 per month,

which comes out to $36,000 per year.

All right, so we're going to use those numbers

throughout this entire talk.

So, and let me just make one clarification here,

just because the number happens to be the same,

that 5500, in the example we gave of,

the first example was this general,

or whoever has a huge pension,

making, they're making $10,000,

and we said that 55% of that is what would go to the spouse.

That number was $5500 once that pensionee dies.

It happens to be in this case that the number

we're using for Brian's initial starting point

is also 5500.

I just want to remove any confusion,

because if you hear the number 55 in that first example,

that is what the spouse gets after the 10,000 pensioner dies.

In this case, scratch that,

we're scrubbing that.

55% is our starting number that Brian's getting

as the retiree here,

and the reduced number of 55% is based off

of the starting point of 55,

and that is the 3,000 a month that Brian's highlighting here,

just to remove any confusion

since those numbers happen to be the same.

Yeah, yeah, good call.

And that was pure coincidence.

It's funny how that worked out.

Yeah, but on the face of that,

on the surface, it seems somewhat reasonable.

She gets a guaranteed government income,

and what's not to like about that, right?

So I'm guaranteeing some income for her for the rest of her life,

but there's some problems.

What do you see considering that was $128,000 and $728,700 paid,

if I live the entire 30 years and continue to pay into that?

Any problems you see with that, right?

Like the downsides?

Yeah, there's obviously a break even point.

If you live, like the longer you live,

and the more you pay into this,

without any kind of continued benefit for her,

obviously this becomes, at a certain point,

becomes a sunk cost.

You could outlive that entirely,

and now you've just paid that amount of money.

So there is the extreme,

I mean, that's the problem is the quote,

worst case scenario here, financially speaking,

is that you live a long life, right?

Yeah, we go to the best.

And there are 90s.

Yeah.

Right, that's the best case scenario.

We want you guys to both live that long,

and so the best case scenario is that you spend $128,000,

and this becomes a sunk cost,

that gets you no benefit for your wife once you pass,

once you live past 70.

So there is, there is that initial bad scenario

where you don't die,

and even right there, the misaligned incentives here,

it's like, you know, if this is worth it,

you need to die early,

at a certain point where those,

like obviously, you know,

it's kind of like your insurance.

You know, you make your first premium payment,

and you die the next day.

Well, from a numerical rate of return,

the best case scenario is that you die the day

after you pay your first premium,

because that is the largest return on what you put in.

Same thing here,

you make this first payment of a couple hundred bucks,

and then you die the next day,

well, that's the best financial outcome,

as far as your wife is concerned,

in a vacuum of her specific situation.

Obviously, we don't want that there.

We don't want that to be the case.

We want this to be a sunk cost,

just like a term policy.

Nobody wants to claim on their term policy,

because that means you died earlier,

you want to outlive it.

But again, we're talking about insurance

and protecting against a risk here.

Yeah, and so I'd say like,

in comparison to whole life insurance,

you know, just like terms,

since you brought that up,

we're just paying,

we're renting this annuity,

if you'll think of it that way.

So compared to whole life insurance,

there's no cash value built up.

So I'm paying that from 42 to 52 to 62,

I have a need for finance in my life,

but I'm getting nothing out of that.

So right off the bat,

when I look at whole life insurance,

I'm building cash value.

Now, to have whole life insurance

is going to work for this.

It's much higher premium than the cost

of the survivor benefit plan.

And that's a factor in this decision matrix,

because as well,

but every dollar we pay into this,

it goes into a government system,

and it disappears.

And you know how we both feel about that.

We can't bar about it.

We can't access it.

We can't ever get it back.

Pure insurance.

So there's no asset value here.

The conversation to me sounds kind of like

when we talk about waiver of premium rider,

that might be a little bit more analogous,

where we say, hey,

a couple hundred bucks a year,

if you get disabled and can't earn income,

the company pays your premium,

we're talking about pure insurance.

And so when we're looking at the other elements

of our policy structure,

and for those IBC clients, this will make sense.

The base premium, you know,

generates a scaling cash value over time.

The PWA premium generates a flat,

almost one for one cash value over time,

the dividend is an exact one for one cash value over time, right?

And so each of these elements of your premium

have a benefit.

But this one, waiver of premium,

we describe as insurance on your insurance.

It doesn't provide you any,

it's a sunk cost if it's not used.

But it is there in case something that happens.

It's the same kind of discussion here.

Hopefully this becomes a sunk cost.

But if you need it,

it does provide that element of protection.

So the only question becomes,

can we match that outcome in a more efficient way?

And that's where we get into a more in-depth comparison.

Right.

The second problem I see with it

is what happens if your spouse dies first.

So we also, you know,

when you're making this decision,

you also have to consider,

is she healthy?

Does she have a whole bunch of health issues

and is unlikely to live you or he,

you know, for the woman or his diary?

But, you know,

if they die before you,

you get nothing.

The earlier they die,

the less sunk cost you had,

which is not a premium,

which is not a great outcome.

But let's say they die 30 years into you paying this.

I would have paid the entire 128,700 gone forever.

There's no refund on that.

It's just,

it's a user to lose an aspect of the survivor benefit plan.

And that's,

that's like truly a risk.

You're just paying money out.

And then she dies like,

oops.

Government got your money.

So, yeah.

So there's a big cost there.

I mean,

the,

the third cost that says,

or sorry, go ahead and read.

Oh, yeah.

Keep going, man.

Our, our third cost there is going to be opportunity costs.

And this is really where

the conversation is going to have to get like,

get down on paper

and technical looking into the week.

Because the opportunity cost of paying this,

you know,

is going to go,

we're going to say,

all right, well,

we could be paying a couple hundred bucks a month

towards survivor benefit plan for this protection.

What else could we do with that money?

But in order to do something else with that money,

we have to also

bake into it that there's going to be a cost of insurance here.

But then those costs of insurance,

that, that,

you know,

if we do it with whole life,

generates value that we can then use in leverage, for instance.

And so,

it's not as simple as,

you know,

you know,

the knee jerk conversation,

like you talk to,

you talk to your,

your,

your Dave Ramsey's,

like that,

that kind of mentality

and that,

the type of financial strategy we always hammer,

the knee jerk reaction is going to be,

oh, don't do that.

Put,

put those $300 into an index fund or a mutual fund

at 12%,

and you'll weigh out perform any benefit

you're going to get from,

you know,

from her out living you

and then getting this 50,

this $3,000 a month,

or whatever that 55% number is,

that she would get

continuing on after you die.

And it's always going to come down to,

well, what if you just invested this money instead

in the money,

in mutual funds?

Well,

that's not the kind of conversation

that you should be having.

Like,

if that's the level of analysis

you're doing,

and should I be

in putting money

into the fiber benefit plan or not,

that's not the right answer.

Because you need to compensate for an apples to apples,

you need to have a protection element

that you're replacing the protection

that you're losing here.

And so,

that's where the life insurance death benefit comes in.

And so,

can we,

adequately replace the protection,

while providing some value,

and then from there,

can we leverage that?

So, the opportunity cost is going to be the most detailed

and the most specific to your situation here.

But that's another major consideration here

and potential flaw of,

of what that money could have done,

had it been able to provide both protection

and generate returns.

And so, again,

that's like,

that is the bread and butter

of the conversation

that we would have

with an individual

making this analysis.

Yeah, and,

and beyond what you said,

you know, part of that analysis,

when you're choosing whether to do this or not,

is what kind of assets do you have?

If you,

if you're somebody that has,

like, let's say you,

you're, you're doing the option trading,

like we do,

and you've built a multi-seven figure portfolio

that changes the metric

on whether you want to dump a couple hundred dollars

into this,

maybe benefit.

You know, so,

everything,

we have to look at the entire picture

before you just say,

yes to this or no to this.

There's,

there's a lot of variables

that need to come into it.

But I think something that's near and dear to our hearts

as fathers

and people that are thinking generationally

is the fact that this benefit dies with your spouse.

Now,

they're,

we're not talking about them on this.

There is a kids option

where up until a certain age,

if you die before,

you know,

while your kids are young,

they can receive the benefit

and not your spouse until that I can't remember the age

off top of my head.

Let's,

whatever it is,

something in the early 20s

with college or not college,

that's fuzzy to me.

I didn't really study that too hard,

but that benefit exists,

but only while they're young.

The,

the 99% solution when it comes to S.B.P.

is they're trying to take care of your wife

and that's what most

service members are doing.

So when she or he dies,

it's over.

Your kids get nothing.

There's zero inheritance.

There's no generational value.

There's no asset to transfer.

For me, that's a problem.

But not everybody thinks that way.

And if you don't care about that,

you don't have kids

and that doesn't matter.

It's not a problem.

Yeah.

And I think the fourth major issue

is that you are locked into this.

So after you retire,

there's a window.

It's it's just after two years.

So from 25 to 36 months,

basically between the second and third year

that you can opt out of it.

If you miss that window

or something changes

in the decision matrix,

once you get past that three-year mark

or that two to three-year mark,

you're done.

Like you're paying it for 30 years.

There's no more options.

Now, it does stop paying

if your wife pre-deceases you.

So the payments end immediately

or, you know, that month.

But you can't change your mind

in 10 years and say,

ah, this was a bad idea.

Or I've built a real estate empire now

or I've built, you know,

a lot in the market.

And I don't really need this anymore.

Too bad.

So I don't like the fact that you're locked in.

You have something we talk about.

You're lacking control.

Yeah.

For me, that's a problem.

For me, that's a problem.

And maybe those first few years,

because when you do the analysis here,

like we said, the earlier you die,

the more value there is here.

And so those first few years,

if you have decided

and you're within that window still,

you know, it might be a decent call

because the returns in that situation,

if you were to die during those three years,

are really large, you know,

because the longer she lives at that point,

you've paid very little in cost,

but you've generated a pretty substantial

ongoing annuity plan effectively for her.

And so that could really be a time

that's the most exposed that you are in those early years.

And there's analysis there,

like family health history,

service related injuries that are service related.

Maybe you took too many poisonous jabs

and you have some kind of autoimmune disorder

and you're looking at dying young,

like you have to think about so many more variables

than check yes or no.

Right.

If you're triple boosted or whatever,

you know, probably this is not a bad play for you.

It might not be a bad play.

And I'm even saying that,

like that's going to,

we'll get to the conclusion,

but sometimes this makes sense.

So,

so let's talk about like when it actually pays off.

Remember the numbers.

I can flash that screen again here real quick.

300 and change a month.

Got you your wife about 3000 a year.

Sorry, 3000 a month.

If you died early,

that being 55% of your $5500 monthly pension.

Yeah.

So we pay $128,000 approximately.

If I live, you know,

if I live the full 30 years,

I'm going to pay about that much amount that that much.

She's going to receive this now.

There are cost of living adjustments to this,

but I don't know what those are going to be.

So we just stuck with this with no inflation.

Just,

you just have to work with that.

We can't,

we can't figure out every single metric forever.

So the, the nice thing is,

is she only has to receive that for three and a half years

for it to actually be to get all the money back that I put in.

So that's not a terrible outcome.

As long as she lives three, four years,

she's going to get every dollar put in.

If she lives 30 years,

she's going to get $1,089,000 in total benefits.

If she lives 40 years.

And that's assuming you pay,

that's assuming you live the full, like you,

if you,

earlier you die,

the sooner that break even happens for her.

Absolutely.

But two years one,

it could be a month.

If I die right away.

So yeah, that,

like you said,

in the beginning,

the closer we get to that number on the front end,

the better benefit this is.

But this is assuming I live and pay for this for 30 years.

If she were to live 40 more years,

like maybe she's a lot younger than you.

Another thing to think about.

If you've married somebody that's 15 years,

20 years younger than you,

like,

they're probably going to outlive you by a lot.

Might be worth it.

But yeah,

so she lived 40 years that ends up being like 1.45 million.

So the longer she lives,

the better that is.

And,

but again,

it assumes you die first.

And there's another assumption there.

There's another rule about this, actually.

It assumes she doesn't remarry before the age of 55.

If she,

I actually have a friend in this situation,

who is,

who is engaged to somebody,

but they're,

she's not 55 and receives this.

So the 55 year old thing,

like,

you can't remarry or this cuts off completely.

Now,

if that person divorces before their 55,

it resumes.

So really weird rules around that.

They just can't be married to another person

and receive this at the same time.

They can get married.

They can get divorced.

Pick it back up.

And if they get married at age 56,

they can continue receiving it.

Yeah.

So your friend effectively has to,

like,

can't,

can't get,

can't get remarried

if she wants this,

this,

payment to continue.

Correct.

And yeah,

and with,

with multiple young children,

like it,

it honestly probably doesn't make a lot of sense.

Yeah.

Which is a shame.

Like,

so the,

so the state the government is saying,

like,

no, you're going to remain alone.

You're going to remain a widow

if you want to receive this benefit for,

you know,

your deceased spouse.

Yeah.

Ridiculous construct there,

but that's a whole other discussion.

So there's something called DIC.

That stands for dependency

and indemnity compensation.

This is an important part

that we need to talk about

because it changed just three years ago.

That's a VA benefit.

It's approximately $600 a month.

So if,

1600,

1600,

what do I say?

1600.

Oh,

1600,

$1,600 a month.

1600 a month.

Thank you.

So that is a VA benefit.

If the VA determines

that your death is related to a service-related injury

or problem,

or you've received 100% VA compensation for 10 years,

your spouse is entitled to this $1,600 a month,

which is $19,200 a year.

Prior to January 1st, 2023,

those two things offset themselves.

So survivor benefit plan was reduced directly by that DIC

by this VA benefit.

So they could only still get the maximum survivor benefit plan.

So you paid more money into it.

They got less from that particular benefit

if they also got the DIC.

Well, as of three years ago,

which nobody talks about,

they're allowed to receive both.

So that changes a lot.

That's adding 19,200 to their annual annuity.

So now,

instead of 36,300,

what's that go up to?

55,500 I think it is?

Doing some quick mental math there?

Yeah.

So you're basically recovering essentially

in that situation,

you know, using our U as an O5,

you were getting 5,500 a month,

your wife got 3,000 after that offset.

We're not quite all the way back up to 55 with there.

We're about 45,

but we're recovering some of that,

that 45% haircut that you take.

So the family is, you know,

that is certainly a,

from a policy decision or from our perspective

as someone considering this,

this is certainly a big thing in the plus column

that you're no longer going to forfeit this right

that you might have.

And so we can debate

like a lot of the policies and stuff.

If I was a lawmaker,

I'd get rid of military pensions

and VA disability entirely.

But then as long as it exists,

I'm going to collect a VA,

you know, the VA disability I qualify for,

had I made its 20,

I would get the pension, right?

And so like,

as long as the system exists as it is,

we don't really need to do too much discussion

of the merit of these policies.

But this one,

we can categorically put into the plus column

for us trying to make a decision.

It's a totally different value proposition here.

I mean, it's that,

that comes out to like on those numbers

with our example here,

the 55,

or I'm sorry,

the 3,025 a month on SPP

and then add to that the 1,600.

That's over a 50% increase in her,

what would be her monthly annuity.

So totally different.

And you really need to make a good decision there.

So you really got to, you know,

think about how you're looking at this.

And what is the likelihood

of you having that,

if you have 100%

and you know you're going to have a 100% VA disability

like lock that in,

that's probably pretty good.

If you have a high likelihood,

let's say combat veteran,

you've had major problems,

toxic exposures,

different things that you can easily say,

there's a high likelihood

I'll have a service related death.

It's definitely something to think about.

If you were a pencil pusher

who never deployed

and have no actual disabilities,

then you have a very low probability

of having your death related to your time in the service.

Like,

probably not something you should build

into the decision matrix.

All right.

Let me just ask this,

because this is,

this DIC element is new to me,

because again,

SPP fell off my radar as far as

really personally tracking it

when I no longer qualified for it.

And so,

this DIC,

so if someone's listening

in my situation,

they didn't make it to 20,

they don't have the pension.

So SPP isn't a conversation

there ever going to be having themselves,

but they do have a 100% VA disability.

And they live for 10 years

and 12 years in,

let's say,

by after collecting 12 years

of 100% VA disability,

is that,

are you saying that this,

that that person automatically

qualifies for DIC,

like their spouse

is going to get 1600 a month,

just because independent

of the SPP conversation,

they don't have a pension,

they don't have SPP,

but if they live for 10 plus years,

they're locking in

an annuity for their spouse

of $1600 a month,

just by merit of that VA claim

being 100%.

That's how,

as long as you maintain

that 100% rating

for the whole time,

the whole duration of 10 years.

Interesting.

Yeah.

So this exists separate,

but the problem was,

and there was a whole bunch

of lobbying around this

that finally,

the law has got passed

in 22,

an effective January 1st,

2023,

that it used to,

like, the government was like,

oh, well,

if they're also getting this,

they're not going to get as much

of this,

and they're two separate things

because you can get one

without the other.

And, of course,

the government just screwed the pooch

on that one for a long time.

And there was, like,

a phase-in period

for a couple years.

But, yeah, now,

you can get 100%.

You can get 100% policies

in general,

but they exist.

And so, you should understand them,

and you should optimize

within them.

And on that note,

if you are a veteran

with a disability claim,

that's less than 100%,

and you haven't tried

to get it increased,

there are services

that will do that for you,

and we know people

who have used them effectively

to go from

either 0 to 100%

on their first try,

or from whatever percent

they got themselves,

to 100%.

And so this is,

this is another compelling reason,

not just for a while,

you're alive,

you're looking to this,

get yourself to 100,

because that's a great value

right there,

and those companies,

most of them,

if they don't get you

that increase,

you don't pay them.

So, reach out to us,

and we can put you in contact

with people who have done this,

or companies that do this,

to where you get a free look,

effectively,

can we get you to 100?

And you'll only pay us

if we do get you an increase.

And ideally,

you get to 100,

so you start your timer

on this 10 years

towards this DIC,

because that's a very powerful

annuity right there.

And when we think about,

for instance,

if you have 100% disability,

say two kids,

it's about $4,200 a month,

tax-free,

if you put that into a calculator,

an annuity calculator,

and said,

how long,

like,

how much would you need to put

into a single-pay annuity?

How much of a chunk of capital

would you need to turn

into a money printer

that could generate

4,200 a month of tax-free income

for life at your current age?

You'd probably need about

$2.5 million,

paid to an insurance company

in the form of a single-pay annuity

to generate that income for life.

And so if you have that pension,

or sorry,

if you have that,

that 100% disability,

it's as if you had

2.5 million to invest,

and you put that into a cash flow engine

that generates

spits out cash flow

for you for life,

you, that's about replaced,

that's as if you had an asset

worth $2.5 million

working for you,

printing out money, right?

That's how you think about a single-pay annuity,

is this is a printer,

this is an engine,

I've basically bought an engine

that generates cash flow.

In this case,

you have a $2.5 million

dollar Rolls-Royce engine

that's giving you

this 100% disability tax-free for life.

And so in that example,

about a third of that

is the $1,600 a month,

so you could say that

if it's 2.5 million,

then about a third of that

is how much this engine

that you're creating

for your wife is worth,

if you lived 10 years

with a VA disability of 100%.

So get that disability,

get that $2.5 million

working for you,

generating cash flow,

and then when you die,

the engine doesn't just go away

when this example

with the VA disability,

the engine just reduces

and size by about two-thirds,

but you still have an engine

generating cash flow

for your spouse.

So that's an enormous plug

for the value of doing whatever you can

to get to 100% disability.

It's funny how I used to be, like,

opposed to that

until I realized

how the VA more or less

a lot's a 100% disability

to every service member

ahead of time

and what you don't get

just goes somewhere

in the government

throughout,

and they blow it.

So I feel like,

I feel now that I've learned

that it is always better

in your hands

than the government's hands

because we know

that at $38 trillion in debt,

they will not allocate

the money well.

Yeah, they're currently

not just emerging family.

And you can actually say,

blood and treasure,

you know,

as of the last week or two,

they're just going to start

blowing blood and treasure

on another pointless war.

And so, you know,

take it out of their hands,

put it in your family's hands,

put it in your family's economy

and generate cash flow engines

for yourself.

That's what we're trying to do

overall with our financial strategy.

And if you can have

someone supplement that,

i.e. in this case,

the VA,

or the government,

via your pension,

like,

the system exists

as ridiculous as it is.

So just optimize within it.

That's a,

that's always

should be our goal.

I agree.

All right.

So let's talk like really quick,

you know,

this is an infinite banking podcast.

So we don't have to hammer

all these homes.

But let's just kind of talk

about the alternative now.

So we've given the two scenarios.

We've given straight SPP.

We've given SPP

with the DICVA benefit

survivor plan.

But we haven't talked about

a whole life yet.

So some differences.

As, as we know,

the fundamental differences

is with SPP,

like we've said it

multiple times,

you pay for 30 years,

you get no cash value,

your spouse gets money

after you died,

ends with her.

And if she dies first,

it just ends.

You lost that money.

So you have zero access

to that cash once again,

your entire life.

So Hans,

compared to whole life,

a quick bulleted overview

of the SPP

of paying money.

And of course,

I do want to caveat

before you talk about this

that in order to make

this system work,

you're going to be paying

more premium

than you would for

survivor benefit plan.

Like we're going to build

a system,

a banking system

with much higher premiums

in these examples.

So it's not an apples

to apples as far as the input

into SPP

or the input

into whole life.

But run with what's different

there.

Yeah, and it gets back

to how we frame premium

within the IBC conversation.

When I look at the premium

that I'm paying,

it's not an expense.

Like if I had

survivor benefit plan,

and I'm looking at,

here's my cash flow,

and here's an expense,

I'm purchasing something

that is an out-of-pocket expense

that generates

while I'm alive,

no income,

no value, right?

It is just paying

it's a pure cost

of insurance.

When we're talking

about a whole life policy,

structured the way

that we do,

none of those dollars

that we're paying

into our premium

are just an expense

for an if,

if, or, you know,

like a binary scenario,

like a term policy,

which is just

due, died, or in the term,

or not.

Every dollar that goes

into my whole life policy

is generating value now,

and in the future,

guaranteed.

And so I don't look

at this as an expense.

So I don't mind the fact

that I'm paying more

than I would be

to survivor benefit plan

to recreate

the same protection

because in doing so,

I'm generating value now.

And so let's say,

whatever the premium

amount is that we're talking

about here,

if 80% of it right

off the bat

is generating cash value

that I can use now,

and then I can start

leveraging that via the function,

but the mechanism

of the policy loan,

I can put that savings

to work

without depleting it

as in,

doesn't mean it's fully

accessible

because it's leveraged,

it's collateralized

via policy loan,

but it is still

growing and compounding

as if it's on touch

because it technically

is on touch.

And so we're putting

that death benefit

in place,

and effectively borrowing

from that future

death benefit

by using a policy loan.

And without going

into all the benefits

of the policy loan,

it is the most powerful

lending mechanism

we can possibly access,

and it's something

that we should understand,

and it's not as,

you know,

if you know how

to use a policy loan,

then you understand

why it's not,

it's not just that,

well, here's money

going into a policy,

and here's money

going towards SPP,

and this is our two

comparisons,

because when I think

about what I'm doing

with my cash value,

I'm generating well

over 100% return

on the interest

I'm accumulating,

and anybody who's gone

through an intro call

with me understands

that we've walked

through the policy loan,

we also have an article

on the blog walking

through the mechanics

of the policy loan,

we have several

podcast episodes on it,

but I think

if you don't understand

how to use a policy loan,

just take my word

for it now,

and we can discuss it,

graphically,

and walk through it later,

that it's not just,

it's the fact that I'm,

I'm making 100% return

on my cost of capital,

is very easily

provable,

and so if I'm,

if that's the case,

then I know that it's

beyond just getting,

you know,

instead of SPP,

I'm instead paying

towards a policy,

but then I use that policy

to then springboard

into,

whether it's

those stress options,

crypto, whatever

my investment strategy is,

I'm facilitating investment

in a manner

to grow these dollars

without depleting my principle,

because I'm borrowing

against that future

death benefit,

so I don't know how deep

you want to go

into policy loans,

but it's like,

don't, the summary for me

is don't just think

of this as,

both of these things

are sunk costs,

which sunk cost is less,

that's not accurate.

I would much rather pay

a $10,000 premium,

than, you know,

that whatever the

100 a month is,

right, the $3,600

that I'm paying

towards, you know,

survivor benefit plan,

that $3,600 is a

sunk cost,

where my $10,000 annual

premium,

structured for IBC,

zero of that is a

sunk cost, especially

once we get past

this initial

capitalization period.

Again, that might not

make sense if you've

never studied that

in IBC policy,

you never walk

through how to use it

with us,

but it's,

keep in mind that

it's not an apples

to apples comparison,

and it can't be

really,

and so we would need

a lot more analysis

to really get an apples

to apples here,

but if you have time

to build this IBC

system before you get

to the decision

of, do I sign up

for SBP or no,

you can make this

conversation a move

point.

There's no comparison.

But if you're at that

conversation,

which is where we're

starting right now,

this 42-year-old

who has to make this

decision now,

well then we really need

to get some,

some momentum going

with this policy,

and so that's a little

bit of a harder decision

to have to get a lot

more granular.

If you're younger,

if you're still in the

military for 10 years in,

you've got time to

retirement,

you can generate something

now and schedule

with us

without having a

conversation.

You will blow the

SBP out of the water

guaranteed.

Well, you just need

to understand how that

works.

You will.

So I'm going to share my

screen here again now

for compliance purposes.

I can,

I didn't want to share

the actual illustration,

so I transcribed

everything,

but we got all the

important numbers

here.

So what I said is I

took that 42-year-old

O5, assuming he's going

to remain in the

workforce,

he or she is going

to remain in the

workforce,

and can easily afford

this with their pension

plus their new

salary,

their new income,

their new business,

whatever they're doing.

So they're paying a

$20,000 annual premium.

I only broke this

down on one.

Assume for the next

couple of examples,

it's something similar.

So this is a base premium

of $4,186.

I put the waiver premium

on here,

which Hans mentioned

earlier,

it's a little bit of a

sunk cost

that provides a

phenomenal benefit

that we think is well

worth it,

but that's

$351 a year

combined for the whole

life in the term.

There's a 30-year term

premium on this,

and that actually

takes into age 72,

which is important

because the longer

that term lasts,

the more expensive it is,

and in this case,

it was still only $340

a year.

So really inexpensive.

I think it was like

$100,000 or something.

It's not it.

I didn't need a big term

for this.

And then the PUA,

the portion of the PUA

is $15,122 right here.

So this person would have

actually been capable of

paying another $2,000

if they wanted to,

if they had the

cash flow to do it,

and that would generate

even better cash volume,

better death benefit.

So if we look at this,

here's some random breakdowns

I put.

And the reason I stopped

at $35, as I said,

the average life span

in America for a male

is $76.5.

So I'm killing this

officer at $77,

and saying that's what

they could deliver.

Interestingly enough,

the 30-year mark

is also marked here.

So this is the point

at which they would

stop paying survivor

benefit plan.

So if they lived

to $72,30

into the policy,

those payments

to survivor benefit plan

would stop.

They would have paid

the total $128,700.

All right.

So let's now,

let's look at this.

Like Hans was saying,

you have access

to this,

this column, I should say,

the entire time,

for all the things you do,

whether that's investments,

whether that's purchases,

your daughter's wedding,

college,

buying a home,

whatever you spend money

on that you finance now,

you can access this

through the policy-loan provision.

So this isn't locked away

from you your entire life.

And these numbers,

as you can see,

climb substantially

by paying that premium.

So at 30,

you at that point in your life

have access to $1.2 million

in cash value.

And if you would die right then,

you're delivering a $1.75 million

benefit.

Pretty substantial.

Now,

if you died here,

your wife was better

with the survivor benefit plan.

Fact, period.

She would have received

more net income

through her life

if she lives a long time.

Again, all those things come in.

So this is a,

it's a time game here.

And you really need to think

about all those things.

But let's just look at the,

the next example real quick,

to show what Hans was just saying,

start young,

I took a 10-year officer,

you know, assuming they started

at age 22,

they're halfway through their career,

they know they're going to commit,

and they're,

they're going to have to make

this decision on the survivor benefit plan

in 10, 12, 13 years,

whenever they retire.

So I lowered the premium a little bit,

just by 2000.

And this would,

this is a substantial premium

for somebody at 32

based on their rank

and based on their income.

So it can be done.

I know it can be done

because we've done it.

But taking $18,000 a year.

So look at their cash show.

You know,

look at those same things.

Now remember,

this person will be 40.

They would have paid 40 years

into this.

So at that mark,

they have 1.9 million.

And the death point,

age 77,

they have 2.4 million in cash value

compared to the officer

who started at retirement,

42,

they have an additional,

what about $800,000 in cash value.

Just by starting 10 years sooner.

And if they both died at age 77,

they're going to deliver

an additional million dollars

to their family.

That's he here.

This is super important

because with a survivor benefit plan alone,

it ends with your spouse.

And I'm constantly thinking about,

how can I make my family stronger?

How can I,

how can I make sure that my grandkids

are starting off

on a financial,

financial solid ground?

Anything to add in those two owns?

No, it's just,

what,

what,

I like to think through this conversation

when I'm talking about insurance.

Not, not the SPP,

but just in general.

I think,

if you think of yourself

as your self and your family,

then every dollar that you put

into your IBC policy

is going to multiply

many times over

to your family one day guaranteed.

It's the only,

the early few years of this,

where SPP

might be more optimal.

That, that period of time

is if you're comparing to your policy,

those dollars,

that's assuming that you died

in those early years.

And so,

you might have been,

you might have been better off

for a year or two.

It's hard to imagine

that after a few years,

there's a scenario

where SPP was the better call.

If you live beyond, say,

three years,

and we're not going to run

every single scenario.

But really,

the SPP has value

in those first couple of years

when the IBC policy

is really getting off the ground.

But again,

if you died during those three years,

it multiplies

itself many times over

into a death benefit,

which, again,

like we could,

we could just kind of

dive down the,

the technicality

rabbit holes

of comparison here,

forever.

If you're,

if you're in that three-year window,

where you,

you opted into it,

but you saw the time to get out,

you probably could have covered

the most risky years

that you had,

where the SPP really shines.

But the,

the time to build this out,

again, like,

for this 32-year-old,

it's,

it's incomparable

what you can do with this,

and,

you don't even really

have a decision to make,

at that point.

It's really only

if you're coming up

on retirement

and having to make this,

that,

that's even in the cards.

And I think one of the keys here,

just to reiterate,

what Hans always

already talked on,

is the cash value.

As opposed to anything else,

you have access

to this money.

You know,

these are,

these are cumulative amounts.

So,

at 20 years,

you have access

to 552,000.

So,

right,

maybe you want to move,

maybe you want to buy a lake house.

Whatever you need access

to money for,

you have it via that policy-loan provision.

So, you've built a real asset over time,

and that cannot be ignored

when you're thinking about,

you can't think of this in a vacuum

and to think about all

the benefits of this asset,

compared to,

just paying the SBP premium.

Or maybe you do both,

which we'll look at here.

So,

to draw the full comparisons.

And, again,

we can't look at every single possibility.

So, I'm just going to say you died at 72.

Right?

Excuse me,

at the exact same point,

when you stopped,

when you stopped paying

the premiums for a survivor benefit plan.

I made your wife a little bit younger,

so she could collect this for a good period of time.

So, she's 65 when you died at 72.

And she lives at be 90.

So, if you just did the survivor benefit plan,

and you don't have this DIC,

this VA benefit,

you don't have the 100% benefit

or you don't have a service-related death.

She's going to get $36,300 per year.

There's no Cola adjustments here,

just keeping the numbers basic.

So, you've paid $128,700.

She, in those 30 years,

is going to receive $907,500.

This is a key here.

I did the mod of order,

but there's no inheritance effect.

That matters a lot to me.

The net total to your family,

to her,

and if they're still young kids,

or just to her,

is $778,000.

So, if you have that benefit,

if you have the VA benefit,

and she's going to receive $50,000,

$55,500,

you've paid the same amount.

This is what she received in 30 years.

Pretty good.

So, she nets $1,259,000 rounded.

And finally, for that,

if you started the whole life policy,

and I only showed the one,

the 42-year-old,

he would have paid $597,543.

This is if he elected not to do these as well.

He said,

I'm only doing whole life,

and I'm not doing any survivor benefit plan.

So, his family would receive $1.75 million upon his death.

For a net total benefit to the family,

it's subtracting the premiums paid,

even though we do understand

that those premiums have been available to you the whole time,

they've never left your life,

but the net benefit,

assuming there's no policy loans,

and she gets the entire death benefit,

is $1.152 million.

So, you can see that it's not in a vacuum,

because in this exact case,

if everything worked out perfect,

your family is going to receive more money.

Your wife is going to receive more money doing this.

Yeah.

And so, yeah,

and you probably thought that I was just going to say,

a whole life wins.

Of course,

if your wife lives,

if your wife lives,

doesn't live much longer,

she's going to leave whatever's left of this behind,

which I think is a huge perk,

which to me,

because this difference isn't enough,

this $100,000,

to me, the legacy matters more.

So, that's where,

in my personal situation, it matters.

That is isolating it,

as if the only thing you're doing with this policy

is just letting it grow.

When I walk through what I'm doing with my policy,

I show on the line for line on the illustration.

In year one,

I invested in that rental,

the real estate syndicate,

and year two,

I got my first rental property,

and year three,

I got parental properties two and three,

and in year four,

I invested in most of those options.

So, I have five sources of income generated

from that column that we saw there,

and the income generated

from those policy loans

is more than double

what the interest those loans are accumulating.

And so, that's about,

on every dollar that I'm paying an interest

to the company in order to use those dollars,

I'm generating more than a dollar of net profits,

or I'm making at least two,

from these investment returns.

While also, you know,

the tax,

the rental properties are great for taxes.

You know,

so I'm getting,

I'm getting a lot more outside of this.

And so,

to me, if you're doing anything at all,

even if you probably,

even if you just take a policy loan to,

you know, invest in a very basic simple,

you know, index fund or something,

you're going to blow out

that option there

where, in a vacuum,

if you did nothing,

the survivor benefit plan would have been better

if everything worked out.

But again,

the good thing is,

when we're talking about the,

when we're talking about the,

the whole life,

we're removing all of the ifs.

We're not saying,

if you live this long,

like all of these,

all of these considerations,

the ifs are removed.

When we're talking about,

if we pick the perfect optimal plan for SPP,

there is a way that it is optimal.

If this,

if this,

if this,

if this,

we have to make a lot of assumptions

to get to that optimal point