Investment Options for Military Personnel

Military personnel do lead very different lives from civilian employees, but they can make the same smart investment choices as everyone else. Not only do these special citizens have the same chance to purchase stocks or real estate, but they also enjoy special opportunities only available to military members. If you are in the military, set up a diversified investment portfolio while you are on active duty to build a secure financial safety net for buying a home, going to college, adding to your retirement fund, transitioning into civilian life and more.

Time is your friend when it comes to investments. Investing early allows you to develop disciplined spending habits by focusing on your budget and cutting expenses where possible so you have extra money to invest. The goal here is to earn money by saving money by taking advantage of the potential gains from compound interest.

Compound interest is essentially interest earned on top of interest by continuously reinvesting your investment earnings. For example: twenty year old Private Brown invests $5,000 to a personal Roth IRA with an average growth of 8 percent, after 40 years, he could have $160,000 for additional retirement income. On the other hand, Master Sergeant McKee starts a portfolio at age 40 with the same $5000 it will only grow to $40,000.

Compounding can be made more powerful through regular investments. If Private Brown contributed $5,000 annually to the Roth IRA for 45 years, the retirement savings could total over $1.93 million.

That is more than eight times the amount contributed. This is the power of compound returns.


If you invest early you will have more time to recover returns over the long-term on volatile, riskier investment vehicles and earn extra money on interest. Those who begin investing later in life are often inherently more cautious with how they invest their money since they do not have time to weather short-term losses or earn much compound interest.

Military members who take advantage of low risk bonds, special military savings vehicles or invest in retirement plans such as a Thrift Savings Plan or Roth IRA are taking steps toward an improved quality of life. Early investing will reduce the risk that you’ll be forced to make reckless choices to maintain your financial safety net.

3 Advantageous Investments for Military Service members

1. U.S. Savings Bonds (Series EE/E)

These bonds can be purchased by anyone and it is a safe and low risk way to save for retirement. Any purchased bonds will earn a fixed rate of interest that is added monthly and compounded semiannually. Series EE/E savings bonds must be held for at least a year and there are penalties if the money is taken out early.

Bonds are an excellent investment vehicle for military members since they require very little work to manage. Purchase your bonds and leave them to accrue interest over the long-term.

2. Savings Deposit Program (SDP)

This program is set up as investments for military personnel who are serving in a combat zone. To be eligible, the service member must be in one of the designated combat zones, is receiving Hostile Fire Pay and must be deployed for at least 30 days consecutively or one day in each of three consecutive months.

The account holder can deposit up to $10,000 and earn 10% interest annually. While the money is in the account, they may withdraw the accrued interest over the $10,000 quarterly. Interest will continue to accrue for up to 90 days after the member leaves the combat zone and may only be closed once the account holder has left the combat zone.

3. Thrift Savings Plan (TSP)

The U.S. government’s Thrift Savings Plan (TSP) is a vastly underutilized investment benefit available to military personnel. The TSP is a convenient, low-cost, and tax advantaged investment opportunity to contribute tax exempt combat pay and withdraw these tax-free contributions in retirement without paying taxes on the withdrawals. This is an impressive benefit not readily available elsewhere.

  • Tax Benefits – Money invested in a TSP is not subject to federal income tax, which effectively increases the amount you’re able to contribute.
  • Low Expenses – The expense ratio for the TSP is about 0.015%, as low as you will find anywhere, allowing your contributions to compound at a faster rate than in a traditional mutual fund, which typically carries a 1.5% expense ratio.
  • Risk Management – Rather than having to constantly manage your individual fund investments, the TSP offers target date funds which automatically ramp down risk as you near retirement.
  • Investment Choices – The TSP offers different investment options, depending on your risk tolerance and the number of years until you retire. Participants can invest in one or multiple funds to further diversify across a range of investments.
    • G Fund The default investment fund for the TSP, the G Fund is comprised of government securities that offer low risk and conservative returns over time. If you don’t choose one of the other funds listed below, all contributions to your TSP will default into the G Fund.
    • F, C, S, I Funds these are index funds that invest in bonds, large cap stocks, small cap stocks, and international companies. They strive to match the performance of different open market index funds.
    • L Fund The “life cycle” funds are a recent addition allowing investors to choose a date closest to their expected retirement date. The fund allocates assets according to the length of time you have until retirement and adjusts into more conservative investments as retirement nears.
  • Loan Options – If you need to borrow money from your account while still employed by the military, you can take out a loan which needs to be repaid to your TSP account within 1 to 15 years, depending on the type of loan. Two loan types are available: a general purpose loan and a residential loan. *Keep in mind that when you take out a loan, you give up any interest earnings the money would have otherwise accrued, and you will be double-taxed when you pay the interest on your loan from after-tax funds. This is because these funds will be taxed again when you withdraw them during retirement.

Ask a Financial Professional about Making Smart Investment Decisions

Remember, you are never too young or too old to start investing for the future. Speak with your trusted financial advisor or military mentor for guidance on starting an investment portfolio. Be sure to take advantage of special programs and benefits for military personnel as well as public investments for a well balanced portfolio, and give yourself time to earn more interest by reinvesting your earnings.

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