I consider myself a fairly well-informed military spouse. I try to keep up with the news, both official and that of the blog-o-sphere. I attend regular FRG meetings and try not to embarrass my husband with specific policy questions, at all of them.
Apparently, however, I’m already failing at making the transition from active duty family to retirement.
Listen to me closely, if you are relying on your military life insurance policy to carry you through your golden years, you may want to reconsider.
Since we married late in our careers, and lives, my husband and I already had matters such as life insurance set up separately, he through the Army, and I, through my university. We didn’t think much of it. That, it seems, was our first mistake.
We hired a financial planner to help us navigate what felt like very murky waters as we embark on our retirement. Life insurance was her first obstacle for us to tackle.
As a soldier, we relied on the Servicemembers’ Group Life Insurance plan, which seems to have no comparison in the marketplace. For guys who spend their entire careers putting themselves in harms’ way, this is the plan to have.
As retirees, not so much.
As a 42-year-old, through Veterans’ Group Life Insurance plan, $400,000 worth of coverage costs $68 a month, not bad, really.
However, by age 65, that monthly premium jumps to $600. At age 80, you will be paying $1,800 a month for life insurance. And that’s just for the service member. There is another cost if you want coverage as well.
Check the rates for all age levels here: http://www.benefits.va.gov/INSURANCE/forms/VGLIRates-07-08.pdf
Plus, the VGLI program has no cash value, loan products and does not pay dividends.
And honestly, when I sat down with our financial advisor, I really didn’t know what that meant or why it was important.
But it is.
There are whole life policies available that have set premiums and not only pay your beneficiary upon your death, but also build cash value. It’s not immediate, but after 20 years of paying on the policy, the plan we purchased will build over $35,000 in cash value, meaning we can take that money out of our policy without being reprimanded by extra taxes and such. After 45 years left untouched, that amount is expected to be over $100,000.
It’s not meant to be play money, but knowing there’s a cushion there in case of serious accident or illness, made me feel more at ease.
And the big clincher, the younger you are when you purchase whole life insurance, the lower your monthly rates. The company we purchased through never raises that rate once it is locked in. At age 42, my husband’s rate is now locked in at $225 a month, forever. Can you imagine what it would have been if we had purchased the insurance at 17 when he entered the service?
If you are looking toward retirement, you may want to take the time now to begin looking at whole life insurance policies and really compare them with those offered by VGLI.
As a young service member, don’t give up the SGLI. But you too may want to look at purchasing your whole life insurance for retirement now while you are young and the rates are low.
