Investing Strategies and Tips for Members of the Military

If you are serving in the military or are just retiring from military service, there are a number of investment strategies for military members you will want to explore. Like any other career, saving for retirement for those in the military is absolutely essential, and the sooner you get started the better off you’ll be. Here are some investing tips for those and their families in the service.

Do you have enough to retire? Take my quick Retirement Quiz to find out!

1. Consider a Roth IRA

First, setting up a Roth IRA is almost always solid financial advice, however, it’s an especially good idea for military personnel who are receiving tax-free combat-zone pay since all contributions made to the IRA will be tax-free, as will certain withdrawals from the IRA. So long as the laws stay this way, setting up a Roth IRA is a great way for current military members to start saving for retirement. Best of all, setting up a Roth IRA offers you the freedom to invest in a vast array of securities.

2. Get Out of Debt

Next, get out of debt. Military service members have programs designed to help them eliminate debt, which is good seeing as the Financial Industry Regulatory Authority has found that those in the military, on average, incur more debt than civilians.

If you have debt that you are working to eliminate, start by checking out the Service Member’s Civil Relief Act. This Act places a cap on the interest rates for loans you took out prior to active service in the military. By using the benefits offered by this Act, you can quicken the rate at which you are able to eliminate debt, which is one of the first and most important steps in investing. Remember, you want compounding interest working for you, not against you.

3. Choose Where You Live Wisely

Third, be sure to choose your residence wisely. Active members of the military are allowed to maintain residence in whatever state they choose, regardless of where they are transferred or stationed. With this being the case, you will want to choose your residence wisely.

For example, if you are originally from a tax-free state such as Texas and are now stationed and living in a state where you are required to pay state income tax, it is highly advantageous for you to keep your legal residence in Texas. The less money you have to pay in taxes the more money you will have available to invest.

4. Thrift Savings Plan (TSP)

Fourth, don’t rely too heavily on the thrift savings plan. One of the most popular investing options available for military members it the Thrift Savings Plan (TSP), and for good reason. The plan offers military members a number of benefits such as an incredibly low expense. Investors pay just $.28 for every $1,000 invested as well as a matching contribution from the government.

However, one major drawback of the TSP is that it forces you to invest in one of five index funds. This blanket approach to investing is not nearly as effective as a more tailored approach where you are able to pick and choose the securities you would like to invest in.

As such, it’s a good idea to not rely too heavily on the TSP as part of your retirement savings plan. If you would like to put some money it to take advantage of the matching contribution and the low expenses, then it certainly isn’t a bad idea – just make sure you are employing more tailored investment strategies as well.

As a military member, it is crucial that you take advantage of all the options you have available to you to save while you serve. By following the investment strategies for military members outlined above as well as investment tips that apply to a person regardless of their career, you can start building wealth and saving for retirement in the most effective way possible.

Learn more about investing like Warren Buffett and the greatest investors in the world. I teach people how to retire and have enough to live a great life after retirement. Make sure that you’ll have enough by taking my 1-minute retirement quiz.

Blog Embedded 644x200

identicon
Phil Town is an investment advisor, hedge fund manager, two-time NY Times best-selling author, ex-Grand Canyon river guide and a former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence. You can follow him on google+, facebook, and twitter.
  • Mark Morris

    I like the G fund as a place to hold cash while waiting. At about 2% return on hold to maturity 10 yr Tsy, it beats the banks (currently @ 1.30%). When I need it to invest in a “wonderful company,” I’ll transfer what I need to an IRA since I’m over 59 1/2. Mark M. (TIC Student)

  • Jeff

    Attention active military – you can get free stock and option trading with the on-line broker that Rule #1 partners with. We have a banner on our Toolbox that gets you to their deal. To get into our Toolbox, just sign up for the free 30 day trial. Also, veterans and first responders get a lot of discounts and fee waivers there as well.

  • Vic C

    Phil, I agree with your assessment and there is not much control of TSP investments. That being said, to maximize returns would it makes sense to follow $SPX or SPY, and $DJI and use the tools to get out and back in? Looks like something simple like that or holding some funds in the bond rated fund as a TSP berky would allow one to at least bring some control rather than simply a DCA type approach. Then re-allocate from the bond type fund to the S&P/Dow funds as the tools call for a “buy”.