I can only guess that Virginia was their permanent address. Perhaps the couple were visiting Germany.The death benefit may have been needed to help get the body home.
It's my understanding that these type of payments made overseas usually are sent to the consulate and the survivor picks it up there.
I would think that the army does keep service records of former personnel.Since he was retired career personnel, his death is probably noted as I'm sure he would have been receiving a military pension.I don't know how much personal info would be included (marriage, etc) But if he was married while in the military, I would think it would have had to be registered through the military.
Assume that Hampton, VA, was his post-retirement address and check the area's local papers for his obit.
I do not see in your posting that you requested the records from the Social Security Department.Those tell you a lot more than their Death Index does.