Military members face unique challenges when it comes to investing their money. They don’t have much free time, which can make researching and choosing investments difficult for them—but that’s where many helpful tools come in handy! Here are five good options worth considering:
1. Federal Thrift Savings Plan
Investing in the Thrift Savings Plan is a low-cost, tax-efficient way for federal employees and service members to invest. You can select your own mix of investments from U.S Treasuries or index funds which will automatically rebalance as you near retirement!
The traditional TSP is a great option for those looking to save tax money in their later years. With it, you can withdraw funds without having any taxes imposed on them when they retire, and the government will give back some of what was originally contributed by taxpayers just as though all earnings were never taxed!
The Roth version has no upfront benefits but does provide freedom from federal income taxation throughout one’s lifetime – an attractive proposition indeed
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2. Individual Retirement Accounts (IRAs)
One of the best ways to supplement your military retirement is by investing in an IRA. An Individual Retirement Account can be a great way for you to grow and secure your retirement savings for the future!
For 2021 & 2022, there are two different types of IRAs: 1. traditional (pre-tax), which has contribution limits of up to $6K per year; and 2. Roth (post-tax), with contributions limited only when investing through the Internal Revenue Service guidelines. This amount may change yearly but currently sits around $6,000 and $7,000 total investment if you are 50+years old.
3. 529 College Savings Plans
You can use a 529 plan to save for your children’s education expenses without being taxed. The investment will grow tax-free, and withdrawals are free from taxes as long they’re used towards qualified higher ed needs such as college or other postsecondary institutions, as well as some room and board expenses.
4. Savings Deposit Program
The US Department of Defense’s SDP (Savings Deposit Program) guarantees a 10% annual ROI on deposited funds up to $10,000 per year for deployed military members serving in designated combat zones—and it isn’t any old interest rate! You’ll have to be eligible for Hostile Fire Pay and have been away from your family for at least 30 consecutive days or one day every month since serving abroad as an active duty military service member.
5. Real Estate Investments
The advantages of real estate investments are many, including tax benefits and the potential for passive income. Common ways to invest in this asset class include buying properties near military bases or converting them into rental homes (some service members buy houses here so that management is easier).
One of the more popular ways to invest in real estate these days is through REITs. A Real Estate Investment Trust that owns, operates, or finances income-producing properties can be an attractive option for investors looking at high yields with stability coming from owning shares issued by this type of company – something not always guaranteed when investing directly into individual projects!
The military has many opportunities to save and invest, including a 401(k) plan with automatic payroll deductions. The federal Thrift Savings Plan (TSP) is similar in structure to the traditional IRA or Roth IRAs that feature investment choices for both saving money into it as well as putting away earnings on top of what you contribute monthly – making this an excellent way to supplement not only your retirement but also increase outfit pay!
The Bottom Line
The military offers many ways to save and invest, such as U.S. Savings Bonds (Series I is paying 7% through November 2022) or Servicemembers’ Group Life Insurance which can be an excellent investment for your future financial security if you die while on active duty!
Service members also have access to programs that don’t exactly qualify as investments but will certainly help with finances. For example, you can take advantage of the VA Home Loan Program; it offers mortgages without down payments, low-interest rates, & limited closing costs. You won’t need private mortgage insurance either!
The key to success is starting early and contributing as much as possible to these accounts. When it comes time to retire, you’ll be glad you did!