"Post Retirement Expenses"

[texasgungal]

Greetings,

I am roughly 1.5 years out from retiring and looking to forecast what expenses hit AFTER leaving service. I sat through TAP recently and have identified a few, looking for a community sanity check.

Background: At retirement will be 38m, married to 38f civ. I am retiring as an E-6 at 20 years.

Income:

• Pension (High 3) f/ 20yr E6 = $2,348/mo // $28,180/yr
• Disability (UNK)
• Other Work Post Retirement (UNK)
• Brokerage Withdraws (UNK)
• TSP @ 59.5 (UNK)

Expenses: (Here's where I am looking for help!)

• Survivors Benefit Program (Cost of SBP = 6.5% of gross retirement pay 2308*0.065) = $150.02/mo
• Medical - Tricare select - Looks to cost $345 per year for just my wife and I
• Dental? Vision? I understand some might be covered depending on my disability rating, assuming I am rated 0% and need to cover all costs. It looks like FEDVIP is the winning move? What else are folks using?
  
  • FEDVIP: https://www.opm.gov/healthcare-insurance/dental-vision/plan-information/plan-premiums/ using the "Dental Rating Area" to find my region, and the "dental and vision premioums" it looks like the Average for "High" care plans are:
  • Dental: $114 / mo
  • Vision: $25 / mo
• etc? What am I missing? What other mandatory costs are out there on top of "normal" living expenses like rent / utilities / etc?

Huge thanks!

 

[peterku]

@texasgungal Are you sure you want to go with SBP? If you are looking at it from a strictly peace of mind concept, then I say go for it. If you are looking at it mathematically I would venture to guess that you would be way better off going with term life insurance. SBP is taken out before tax, but is cola adjusted so the monthly payment you calculate now will be the cheapest it will get. Getting a term life insurance would not be COLA adjusted, so your payment will be fixed for the term (although the payout is also not COLA adjusted). A lot of people have looked into it and decided SBP only really is worth it if you pass away very early after retirement. Your SBP would only pay your spouse 1270 a month based on your current estimate of retirement, so you would easily be able to exceed that with a term life insurance with setting up some as cash for early use and the rest into an investment account that pays dividends to provide consistent income. An example is a term life insurance of 800k, your wife gets 100k in cash (basically 7 years of SBP payments) and then 700k in quality growth dividend stocks would pay 21,000 a year (3% dividend yield). You can get the 800k term insurance policy for less than SBP and you can see how it provides a much higher quality of life for your spouse.

Your retirement will have very low amount of taxes paid on it (just low federal tax bracket and depending on where you retire at possibly state taxes, but you don't pay SS or Medicare on it). You need to make sure your post retirement work understands the money you are bringing in for retirement so they can adjust your taxes withheld from that job appropriately.

 

[kik899]

@peterku Age matters with SBP as well. My wife is ten years younger than me so SBP makes sense for us.

 

[peterku]

@kik899 It is a personal decision and you have to take your personal circumstances into it, but curious if you are willing to provide the math that shows it is worth it. Again if it is strictly a piece of mind issue I say go for it, but mathematically it is usually not.

 

[mrsbailey]

@kik899 Does it? Would love to see the math on it.

 

[nothinges]

@peterku I did a lot of spreadsheet math with SBP....

The premiums end after 30 years or age 70, whichever comes first later. That makes SBP a no-brainer unless your spouse is significantly older (4+ years) than you.

If you pass away 3 years before your spouse, you break even on SBP... no matter what age that happens.

Also, the average mortality age of a mil retiree is 68. Do with that fact what you will.

 

[peterku]

@nothinges That is not true about 30 years or age 70 whichever comes first. If you look at cola based premiums going up over let’s say 25 years and the amount of money the spouse gets (55% of retirement) if you do the math and get a term life insurance policy you would generally come out ahead. The OPs wife would get 1300 a month or a little over 15k a year. It is something but you could get a policy that you put in solid growth dividends paying an average of 3% that is growing well over the average inflation rate and easily beat the SBP. It does work in some circumstances, but probably not on an E6 retirement.

 

[nothinges]

@peterku

That is not true about 30 years or age 70 whichever comes first.

Yeah, it is

The OPs wife would get 1300 a month or a little over 15k a year. It is something but you could get a policy that you put in solid growth dividends paying an average of 3% that is growing well over the average inflation rate and easily beat the SBP

Under no circumstances can you invest 5% of your pay from retirement to age 70 and be able to withdraw 55% of your retirement pay on 6% inflation adjusted returns.

It doesn't matter what your pay is because it's all % based.

 

[peterku]

@nothinges You pay for 30 years or age 70 whichever is later not whichever comes first.

No one said investing only 5% of your pay. I was referencing buying a term life insurance policy and using that money to invest in high growth quality dividends that would pay way above inflation and pay out more than the spouse would get in SBP.

 

[nothinges]

@peterku Term life insurance expires, and gets exponentially expensive after age 60.

 

[peterku]

@nothinges Yes term does but you have to look at what you are paying for and what you get. SBP is basically buying a COLA adjusted fixed annuity. How many people would suggest buying a fixed annuity based on all of the fees involved??? You could buy a term life insurance policy of 30 years and have a fixed payment for 30 years and when you are upper 60s that policy to renew would be a lot more than current price but you can adjust how much money would be needed or if any money is needed based on SS and whatever other investments through your next job would provide.

 

[nothinges]

@peterku

Yes term does but you have to look at what you are paying for and what you get. SBP is basically buying a COLA adjusted fixed annuity. How many people would suggest buying a fixed annuity based on all of the fees involved???

It depends. At the price of mil SBP, and the fact that payments stop after 30 years, quite a lot.

The only reason you should forego it is if your wife is a high income earner and has or will have her own sizeable 401k / IRA where your pension wouldn't matter if you pass.

For most mil retirees, this isn't the case.

Term life insurance for the value of your lost pension going over age 60 costs over $150/mo. Over age 70 you're looking at over $250/mo, and by then health issues will make it even worse.

 

[peterku]

@nothinges Another consideration is what is truly passable? If you and your spouse die at the same time what is passed to the kids (adult age)? The answer is nothing, but with a life insurance you are passing down that life insurance payout. Again each situation is different and personal, but in my humble opinion it would be a small percentage where SBP mathematically wins in the long-term.

 

[texasgungal]

@nothinges This is great, thank you. 3 years seems to be the magic number I am seeing a lot to be "worth it".

 

[bigbadbear9885]

@nothinges

Also, the average mortality age of a mil retiree is 68.

That was specific to a study of Israeli retirees, US retirees saw an average higher lifespan.

 

[leoooyu]

@nothinges

Also, the average mortality age of a mil retiree is 68.

Wow. This is horrifying. I've never seen this statistic and was hoping to look it up and see it was not true.

This really worries me. I suppose this military thing takes an even greater toll than I thought.

Source:

The Mortality Rate of 100% Service-Connected U.S. Veterans:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8961813/

"In this study, there were 309,977 deceased 100% service-connected U.S. veterans included. The study found the overall average age at death for all 100% service-connected U.S. veterans is 67 years of age. When separated by gender, the average age at death for all female 100% service-connected U.S. veterans is 63 years of age and the average age at death for all male 100% service-connected U.S. veterans is 68 years of age. The study results demonstrate female 100% service-connected veterans have a 22% diminished life expectancy when compared to the World Bank Data average human (civilian) life expectancy in the United States for females (81 years of age) and male 100% service-connected veterans have a 11% diminished life expectancy when compared to the World Bank Data average human (civilian) life expectancy in the United States for males (76 years of age)."

This is scary! When I take a minute to think about it, it makes sense that military retirees would have a little shorter lifespan, but 22% for women and 11% for men? I never would have guessed that. I also wouldn't have thought male retirees outlived female retirees.

 

[leoooyu]

As I think more into this, I wonder what each service retiree average life expectancy is. Some services get "beat up" more than others. Also, I'm sure it is heavily job specific and the deployment tempo is likely a huge factor. My mind is blown!

 

[texasgungal]

@peterku This is great and exactly what my spouse and I were just discussing. Let me grab her and talk it over, sharing these notes.