Being in the military teaches active members to face any hardship head-on without flinching. However, a good number of military personnel may find themselves staring in the face of a retirement future they cannot afford, a deadly predicament. To prevent such a scenario and to safeguard their future and retirement, military personnel must explore investment opportunities and ideas early on in their careers.
These are 5 of the best investment ideas that we would advise servicemen and women to consider as they explore investment opportunities.
Military Pension
A military pension is probably the most reliable investment plan for any military officer who chooses to be in service for 20 years and beyond. Once the officer retires, the fund matures and pays out 50% of the officer's base salary immediately. This amount increases further for every additional year that they were in service by 2.5%.
Along with the cash payouts, the retired officer receives an increase in their annual cost-of-living, which links to the CPI (consumer price index). The retirees also receive a lifetime of affordable medical coverage, a quite impressive pension, and other benefits, including shopping privileges. Despite all these benefits, this fund may not generate as much income as retired military personnel would need.
Federal Thrift Savings Plan
Investing in the federal thrift savings plan is another great investment idea. Automatic deductions from the paycheck are made once you sign up for this savings plan. This money is invested in low-cost mutual funds for the long-term. It has a tax-deferred growth attached to it, meaning that the savings incur a tax upon withdrawal. This investment plan's best feature is that the investment is spread across diverse bonds and age-appropriate stocks.
A military officer can contribute up to $25,000, depending on their age, annually.
U.S. Saving Bonds
This investment is a debt security that an individual buys through automatic deductions from their pay. The money goes into paying for government activities. When this amount is deducted from an officer's payroll, it goes straight to the government as a loan and payable with interest after a set period. The interest on these bonds fluctuates with inflation, but they are still a good investment since they have the backing of the U.S government, there is no chance of losing one's investment here. The investment limit is capped at $10,000 annually.
Roth IRA
This investment option allows the investor to choose from a broader range of mutual funds and stocks to invest in. The investment is taxed at the current rate that the military officer is eligible for, but it is not taxed upon withdrawal. The exemption from tax on withdrawal makes it a better investment than the TSP, which has the tax-deferred feature. If an officer feels that their tax may change between investment and withdrawal, they can pay this difference directly instead of during withdrawal. The contribution limit for this investment plan is pegged at $5,000 a year.
Real Estate Investment
Buying property directly as an investment is another good idea for servicemen and women. There are various ways of doing this; one instance is to buy a residence and convert it into a property for rent. It is prudent to find what would work best; besides, service members enjoy special considerations when buying property. Buying a property to hold and sell later is a great investment choice, too, keeping in mind property price fluctuations based on any number of reasons that affect the property market.
Conclusion
Saving for the future is essential for all military personnel to assure them of a comfortable retirement. Contact us today for an appointment to explore investment ideas available to servicemen and women.