The Alternatives: Term Life, Investing, and What We Actually Decided
In Part 1 I described how my wife and I ran the numbers to see whether there was a more economically sensible way to provide what SBP provides. You might read that as a charitable exercise on my part. It was not. It was a little selfish.
My main objection to SBP — and to life insurance generally — is that I have to die before anybody benefits. Those are not great terms for me.
So the question I asked as we approached the DD-2656 was not “do I want to take care of my wife after I am gone?” It was: can I still take care of her if I die first, and also be taken care of if I do not? Is there a way we both benefit while we are alive?
I think the evidence says yes, and this post makes that case. But it was the answer for our situation. You would not follow us blindly, and you should not follow the SBP brief blindly either.
A Controlled Comparison, On Purpose
In my final year of service I bought a $1.45 million, 30-year term life policy for $167 a month. Those numbers were not an accident. I worked backward from SBP to get there.
My SBP premium would have been $200.85 a month, taken pre-tax. At my marginal rate, that pre-tax deduction costs about $167 in actual take-home pay. So I told the broker: size the largest policy you can build on $167 a month. I wanted both options to cost my household exactly the same money in net take-home, so that any difference in outcome came from the instrument rather than from spending more.
It worked almost perfectly. Over 25 years — the midpoint life expectancy used throughout this series — in today's dollars:
| 25-year NPV, after-tax basis | |
|---|---|
| SBP premium ($200.85 pre-tax) | $34,307.17 |
| Term life premium ($167.00, already after-tax) | $35,216.37 |
| Difference over a quarter century | $909 |
Nine hundred dollars apart across twenty-five years. Same money out of pocket, month after month. That is what makes the comparison below worth something.
The Comparison
Same scenario as Part 2: I die 25 years after retirement, my wife survives 15 more.
| NPV of premiums | NPV of benefit | Net to the estate | |
|---|---|---|---|
| SBP | $42,354.54 | $116,356.80 | +$74,002.26 |
| Term life | $35,216.37 | $685,572.86 | +$650,356.49 |
For us, term life delivers roughly 8.8 times the value for the same monthly cost.
And it holds across the range. Die in year one and my wife receives $1.45 million instead of an annuity stream. Die in year twenty-nine, still inside the term, and she receives $1.45 million. The death benefit does not shrink because I lived longer — which is precisely the flaw in SBP that Part 2 spent a table demonstrating.
Remember the Admin Chief's argument: SBP exists for the tail, the early death that wrecks a surviving spouse's plan. Fair. But term life pays $1.45 million in exactly those early-death scenarios, where SBP's lifetime payout would have been about $454,000. For us, opting out wins the ordinary case and the disaster case SBP was designed for.
The Honest Scorecard
That made it a clear call for our household. It will not be for everyone, and there are four places where SBP genuinely beats term life. Stated plainly:
- SBP is inflation-adjusted. Term life is not. A $1.45 million death benefit in 2051 buys what roughly $700,000 buys today. The NPV above accounts for that, but understand the mechanism: SBP rises every year, term life is frozen the day you sign. Leaving COLA out of my SBP figures understates them by roughly 20% over a 15-year survivorship and 42% over 30. Even applying the full 42% correction — and ignoring the tax your spouse would owe, which you cannot really do — term life still wins by about 6x. But the gap narrows.
- SBP never expires. Term life does. My policy runs 30 years. Live to year 31 and my wife gets nothing, and I will be uninsurable at that age. SBP pays until the day I die, whenever that is.
- SBP requires no underwriting. Term life does. This is the big one, and I come back to it below.
- SBP cannot lapse or be mismanaged. It comes out of retired pay automatically. A death benefit usually arrives as a lump sum that somebody has to invest wisely. Our policy includes an annuity schedule for exactly this reason; if your spouse is uneasy with money, look for a policy that offers one and make sure they know how to elect it.
And two places where SBP loses that I did not price in above: the annuity is taxable to your spouse, while a death benefit is tax-free, and the death benefit stays in your estate — it can pass to your children. SBP dies with your spouse.
Who Should Keep SBP
I would rather you finish this series with a decision that fits your household than with mine. So here is the profile, plainly: if you recognise yourself in any of these, the arithmetic points toward keeping SBP, and I would tell you so directly.
- A large age gap in your spouse's favour. A spouse ten or fifteen years younger is very likely to collect, and to collect for a long time.
- You cannot get insured. If a rating, a diagnosis or an age has closed the underwriting door, the alternative in this post is not available to you. SBP requires no underwriting at all.
- A dependent with special needs who will require lifetime support. An inflation-adjusted annuity that cannot lapse is doing work a lump sum does not do.
- Your pension is the plan. No meaningful assets outside it, no second income, no investing habit to redirect the premium into.
- A spouse with no independent earning history, or one who would rather not manage a seven-figure lump sum.
- You value certainty over expected value. This is not a lesser answer. A guaranteed, government-backed, inflation-adjusted income floor is worth paying for if that is what lets you sleep.
The NPV math in Part 2 is right on average. The variance is what ruins a household — and the entire cost of being wrong lands on the person who outlives you, at the point when they can do least about it. Opting out is irreversible. Weigh it accordingly.
The Insurability Problem, or Why to Buy Early
Here is what makes “just buy term instead” dangerous advice if you only hear the headline.
Most people in the military treat SGLI as the only insurance they need, spend most of a career dangerously under-insured, and go looking for term life only after discharge — and after a VA disability rating is already on paper. Depending on what is on that rating, this can leave you uninsurable. If you have a BDD claim in progress, or a rating and you are sitting in that 25-to-36-month SBP window, get a life insurance quote before you opt out of anything.
That is why I bought my policy before my rating, deliberately. I was in my final year, I had a BDD claim in progress, and I knew that a rating on paper would change my insurability picture. So I locked the coverage early — and not only for that reason. I already knew SGLI was not enough and was shopping anyway.
The planning principle here is not really about SBP at all: your insurance needs exceed SGLI and TSGLI the moment you have obligations beyond yourself and a car. Get married, buy a house, have a child — at each of those milestones you should be shopping for coverage, and military-friendly insurers tend to price well. Go shopping, for you and your spouse, while you are young.
If you are already past that point and cannot get insured, you are not shut out. VGLI is your guaranteed-issue fallback. Apply within 240 days of separation and there are no health questions at all; you convert SGLI to VGLI regardless of your medical picture. The window extends to one year and 120 days with a health review, so do not wait. It caps at $500,000 and premiums climb steeply with age, so it is a floor rather than a full answer.
Whichever way you go, you likely also need to self-insure — investing through an after-tax brokerage account dedicated to that purpose. And dedicated means dedicated: the high-yield savings account holding your emergency fund cannot also be your self-insurance. You need both.
The Third Course of Action
SBP and life insurance share a design flaw: somebody has to die before anyone collects. For you personally, both are a guaranteed loss. They are for your spouse and children — though taking my wife's testimony at face value, she would rather “keep you and not the money.” I tend to agree. Rolling dice on who dies first is not much of a financial plan.
So why not put that same $200.85 — $167 after tax — toward something you can both enjoy while you are alive?
Invest it. Take the money that would have gone to SBP or a policy and commit it. At the S&P 500's historical 10.51% annual return:
| Basis | 25 years | 40 years |
|---|---|---|
| After-tax, $167.00/mo — future value | $241,809.35 | $1,234,419.96 |
| — NPV in today's dollars | $114,329.61 | $372,357.34 |
Term life still beats investing over any horizon where the policy is in force. Investing only takes over after the policy ends. That is what insurance leverage buys: an enormous payout for small premiums, as long as you die on schedule.
Ranked by NPV for our 25-year case: term life ($650k) > SBP ($74k) > investing, net of premiums. On the benefit side alone, SBP's $116,357 and investing's $114,330 are close to a wash.
But you do not have to die to spend an investment account. It funds a business, a rental property, a daughter's wedding, a bad year, a good year. It passes to your children instead of dying with your spouse. It never expires. And it benefits either of us, or both.
What We Decided, and Why
My wife and I opted out of SBP. Under the law that was a joint decision — declining requires a spouse's notarised concurrence — and it was one we made together, with the numbers in front of both of us.
Across these three posts, here is what drove it. In the ordinary case, where we both live normal lives, SBP would have netted her roughly $74,000 in today's dollars. Term life, for the same monthly cost out of the same paycheque, nets roughly $650,000. In the early-death case SBP is built for, SBP would pay about $454,000 against term life's $1.45 million. We could buy more protection for the same money — and I would not have to die for the third option to be worth something. It was not a close call for us.
And to make good on the promise to look after her in life and after it, I bought the policy anyway. Just in case.
That is our situation. It may not be yours, and the section above on who should keep SBP is there because for a real share of readers the answer runs the other way. Our decision-support template was simply this: let the math tell you what to do, then check the answer against your values. If the plan puts a knot in your stomach, it is probably not right for you. Listen to the Admin Chief and play it safe.
One last thing. Make sure you are reflecting on your own life rather than inheriting an assumption from the brief. SBP was designed and approved by people who largely fit one profile: senior retirees on large pensions with younger spouses. For that household it is an excellent deal almost every time. It is also a profile that describes a small fraction of the force. If you are not in it — if your spouse is older than you, if your health is better than theirs, if you are a senior officer with a young spouse, or if you simply cannot get insured — the arithmetic may point somewhere else entirely.
Before You Sign Anything
If you are on a flight path to military retirement, or sitting inside that 25th-to-36th-month window from Part 1, this is the conversation you and your partner should be having. Not at outprocessing. Now, with a calculator open.
Run your numbers, not mine. The SBP Defeater is free, needs no signup, and the maths runs entirely in your browser. Open the SBP Defeater.
And when you work with us, SBP is one piece of a larger picture: integrating VGLI with your overall insurance plan, modelling DIC for your surviving family, and adapting the strategies built for civilians into something that actually accounts for a military pension, a VA rating, and benefits no civilian planner has ever had to price.
That is why the Military Wealth Coach exists. See how coaching works.
This content is educational in nature and does not constitute financial, tax, or legal advice. Insurance underwriting, tax treatment, and benefit eligibility vary by individual circumstance — confirm your own situation with a licensed insurance professional and a qualified tax advisor before acting. You are responsible for your own financial decisions.