How to invest at every stage of your military career


Jeff Hinrichs is Charles Schwab’s VP Financial Consultant and a military reservist with more than 29 years of service.

Whether in active duty, reserve or National Guard, managing your daily finances can be unique. With smart investing, however, a financially secure future can be achieved.

Given the high level of insecurity that accompanies the military, the steps taken to achieve life’s great financial goals differ from those of the average person. Training, permanent station changes (PCS), mobilizations and missions can make family planning, saving for studies, home ownership and retirement more difficult. Investing wisely at every stage of your career through retirement can help you achieve your goals.

Before you even think about investing, you need to put an emergency fund aside. Charles Schwabs Military Financial Literacy Survey 2020 found that 46% of service members said unexpected expenses as low as $ 500 would cause financial hardship if paid in full within 30 days. As a rule of thumb, save three to six months on the essential cost of living that you can access quickly in an emergency, and save more if you expect a big life change in the next year.

Once you have an emergency fund in place and are ready to invest, it is important to understand that investing is different from saving. If you don’t save, you can’t invest. In other words, if you save $ 0, you have $ 0 to invest. While saving means putting your money aside and parking it in a safe and accessible account with no appreciable growth opportunity, investing can be riskier, but it does offer an opportunity to build and grow wealth.

Invest as soon as possible

When it comes to investing Started is the most important step. The sooner you start the better, thanks to something called compound growth. By continually investing small amounts of money over time, you are on the right path to financial independence.

You can do this by using the company pension scheme Savings plan for frugalitywho are part of the Mixed pension system and includes a traditional pension when you retire from the military. the TSP offers several investment options to choose from, including target or “lifecycle” funds based on your age. The US government pays up to 5% of your base salary to the TSP under the BRS. If you can, do more to help. A good goal would be to aim for a total of 10-15% of your salary.

You don’t have to be rich to be an investor, and it doesn’t have to be difficult to get started. As a new investor, it is important to understand these three general types of investments and how they can help you strike a balance between risk and reward.

  • cash Investing offers lower returns but is smart for shorter term goals, daily expenses, and emergency funds. These include checking and savings accounts, which are good for everyday shopping, and an emergency reserve; Short Term Certificates of Deposit (CDs); and US Treasuries, which tend to pay slightly more interest but typically need to be held for three to twelve months. Money market funds, ultra-short bond funds and stable value funds can also be considered.
  • bind are investments that provide a predictable stream of income. It is a loan that you give to a government, community, or corporation that promises you a specified interest rate in return and repayment of the face value after a specified period of time, subject to default. Bonds typically pay interest to bondholders twice a year and are useful for capital preservation. As with any investment, bonds carry risk, but tend to be less volatile than stocks.
  • shares are investments that represent ownership of a company. Stocks are relatively risky as the share price can go down and there is no guarantee of dividends. However, as a shareholder, you can earn returns if the price of the stock goes up and you sell for a profit and the company pays out part of its profits to shareholders in the form of dividends.

You can also mix and match different types of investments based on your risk tolerance, time horizon and personal preferences by using individual stocks, fractions of stocks, mutual funds or exchange traded funds (ETFs).

Stay invested throughout your military career

If you’ve been investing for a while, you may have short-term financial goals in mind, like buying your first home or starting a family. However, a military career brings unique challenges such as: B. moving from time to time with PCS orders. By continuing to invest, you can reach your financial goals faster despite the interruptions from the unique challenges you face in the military.

The best way to do this is to diversify your investments so that you don’t put all your eggs in one basket. For the uncertainty that comes with a military career, diversification – while not guaranteeing against loss – allows you to weather the ups and downs of the market and stay in the fight. You can diversify your options to lower your risk by spreading your money across and within different asset classes such as stocks, bonds, and cash.

As your rank and salary increase, so should your savings. For those receiving bonuses for resuming or renewing their service, investing is a great opportunity to put that money to work. One way to do this is to invest in your future retirement. While retirement may seem a long way off, the sooner you start, the better prepared you are.

opening Individual retirement account, either a Roth IRA or a traditional IRA, and monthly dues are extra cushion that can prepare you for retirement or extend your money in retirement.

Keep investing after military service

For those who are retiring from the military, remember that while your service is coming to an end, your investments should not be. Whether you’re embarking on a new career path or retiring, investing can continue to help you achieve your new goals.

Your investment strategy should be tailored to the life path you will take after retiring from the military. Talking to a financial advisor about your unique needs can help you determine your options to maximize your money in the next chapter of your life. New subscription financial planning services make access to personalized investment management and financial advice more affordable and accessible.

As you begin a second career, you will be presented with various benefits and options, such as a 401 (k) plan. If your company offers a 401 (k) and employer investment match, registering and setting up automatic deductions from your paychecks is an easy way to help make your retirement. If you are able, you should consider contributing at least up to the employer’s salary in order to reap this company benefit.

No matter what the next stage of your life, moving out of the military brings new opportunities. Keep learning and keep investing.

With smart investments you can live comfortably and prepare for a financially secure future. visit Schwab Moneywise to learn more about financial planning and how Schwab can help you achieve financial security.

The information contained here is for general informational purposes only and is not to be understood as an individual recommendation or personalized investment advice. The types of securities and investment strategies mentioned may not be suitable for everyone. Each investor must review a securities transaction for their own particular situation.

All expressions of opinion are subject to change without notice in response to changing market conditions.

Investing involves risks, including losing capital.

Diversification strategies do not secure profits and do not protect against losses in declining markets.

Brokerage products: Not FDIC insured • No bank guarantee • May lose value

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