Military personnel have access to additional savings and investment options that are not available to everybody else. Here are some of these available benefits.

People join the U.S. military for a variety of reasons, including patriotism and defending American values. In addition to these honorable motivations, joining the military does provide you with many material benefits that can improve your personal finances and economic opportunities. The following are some of the main personal financial benefits of enlisting in the military.

 

Education benefits

 

One of the most common reasons people sign up for military service is to obtain the various educational benefits offered by the government to armed forces members. Some of these education benefits include tuition assistance, help with paying for living expenses as a student, assistance in repaying college loans and even free tutoring help.

 

Federal military retirement benefits

 

There are two different retirement plans offered by the Federal government to those serving in the military. The Legacy Retirement System (LRS) applies to those who enlisted on or prior to December 31, 2017. Those who are eligible for the LRS will receive a monthly annuity paid for life starting at the time of retirement. Only those who have served a minimum of 20 years in the military will qualify for the LRS benefit. 

 

The other military retirement plan is the Blended Retirement System (BRS) which applies to military personnel who have enlisted on or after January 1, 2018. Those that enlisted during this time period will be automatically enlisted in BRS which combines the defined-benefit pension plan with a specific defined-contribution plan known as the Thrift Savings Plan (TSP).

 

Thrift Savings Plan

 

Similar to 401(k) accounts, the TSP federal retirement plan allows servicemembers to make contributions to the TSP account from their base pay. These contributions can either be before or after taxes, depending on whether you have selected a traditional TSP or a Roth TSP. 

 

The Internal Revenue Service (IRS) limits the annual contribution military personnel are allowed to make. This limit for 2021 was $19,500 and is set to increase to $20,500 in 2022 with an additional $6,500 for those 50 years of age and older.

 

Of course the TSP can be implemented in addition to a traditional or Roth IRA.

 

Savings Deposit Program

 

The Department of Defense offers qualified active-duty military personnel the Savings Deposit Program (SDP) which allows you to earn interest at a generous rate of 10% compounded monthly. The maximum amount you are allowed to deposit into the SDP account is $10,000. All funds are returned to you upon termination of deployment. 

 

To qualify for the SDP you will need to be deployed in an eligible combat zone. Also, you must be deployed for 30 days consecutively or one day in each of three consecutive months.

 

Military savings account

 

Banks and credit unions commonly offer savings accounts, CD accounts, money market accounts and various other types of accounts with special provisions and benefits to military personnel. This may include higher interest rates as well as reduced fees.

 

Designing your savings and investment plan

 

As a military serviceperson you have many options when creating a plan for saving and investing for the future. However, not every option will be right for your particular situation. This will all depend on what you are trying to achieve through your family financial planning efforts. 

 

Raymond James and its advisors do not offer tax or legal advice.  You should discuss any tax or legal matters with the appropriate professional.

 

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.  Any opinions are those of the author and not necessarily those of Raymond James.

As an investor you have the opportunity to choose from a variety of different types of mutual funds. Each type has varying levels of risk and opportunity. 

Mutual funds are a type of investment vehicle that allows you to combine resources with other investors for the purposes of making investments in securities such as stocks, bonds, commodities and sometimes other types of alternative assets. Essentially, these investment vehicles are funds which are managed by a professional financial expert who makes investment decisions based upon the mutual fund’s prospectus. Each prospectus will determine a certain risk profile, financial goals and specified types of asset purchases that the fund manager will adhere to.

 

The advantage of mutual funds is that they allow you access to a professional fund manager without large amounts of money. There are several different types of mutual funds that you can choose from.

 

Equity funds

The most common type of mutual fund is the equity fund which invests in mostly stocks.

 

Fixed-income funds

Another type of mutual fund are fixed-income funds which focus on investing in assets that provide consistent income streams via interest payments. These assets usually include government bonds, corporate bonds and other similar debt vehicles.

 

Index funds

This type of fund will invest in stocks with the aim of tracking the movements of specified stock indices, such as the Dow Jones Industrial Average or the S&P 500. 

 

Balanced funds

Investors who want a broad-based allocation across various asset classes may want to consider balanced funds. The types of asset classes invested in may include stocks, bonds, money market instruments and a variety of alternative assets.

 

Money market funds

More conservative and risk-averse investors may prefer money market funds. This type of fund invests in short-term debt investment vehicles, consisting mostly of government Treasury bills.

 

Income funds

The objective of income funds is self-explanatory: to create a steady stream of low-risk income to investors. This type of fund invests in mostly government debt and high-quality corporate bonds. 

 

International/global funds

An international fund invests in assets based outside of your home country. On the other hand, a global fund will invest all over the world, including in your home nation. 

 

Specialty funds

These types of funds will concentrate specifically on particular economic sectors or they may target companies with a particular type of business strategy. Some of the economic sectors specialty funds commonly target are technology, medical and financials. 

 

Exchanged traded funds

Based upon the general structure of mutual funds, exchange traded funds (ETFs) are curated groups of stocks and securities that are meant to track the movements of specific indices, economic performance of certain geographic areas or particular industries. ETFs allow investors to control a broad range of assets with a single market position.

 

Which type of mutual fund is best for you?

Each type of mutual fund has its own advantages and disadvantages. The type of mutual fund you should choose will depend on what you are trying to accomplish through investing. There are types of funds that are more suited for more aggressive investors and others that are better for conservative investors looking to avoid taking too much risk. Your wealth management advisor can help you sort through all of the options. 

 

Rademacher Financial, Inc.  is a registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting. Rademacher Financial, Inc.  reserves the right to edit blog entries and delete comments that contain offensive or inappropriate language. Comments that potentially violate securities laws and regulations will also be deleted. The information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of any topics discussed. All expressions of opinion reflect the judgment of the authors on the date of the post and are subject to change. A professional adviser should be consulted before making any investment decisions. Content should not be viewed as personalized investment advice, as an offer to buy or sell any of the securities discussed, or as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

 

All investments and strategies have the potential for profit or loss. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that an investor’s portfolio will match or exceed a specific benchmark.

 

Hyperlinks on this blog are provided as a convenience. We cannot be held responsible for information, services, or products found on websites linked to our posts.

 

Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Changing market conditions can create fluctuations in the value of a mutual fund investment. In addition, there are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly.

 

The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal.

 

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.