This past week I had the honor of participating in a Google Hangout with the folks from Veterans United and Jeff Rose, a fellow veteran, financial planner, and author. Jeff writes for the site Good Financial Cents, and his book, Soldier of Finance, is being published this fall.
In the Google Hangout we discussed Military Saves Week, saving and investing opportunities for military members and veterans, taxes, and much more.
Here is a preview of some of the topics we covered:
- Military Saves Week
- Thrift Savings Plan and the Roth TSP
- How to start investing
- Military taxes
- The Debt Movement
- Why Jeff and I started our blogs
- Jeff’s new book coming out this fall
- Disability compensation benefits
- Where to get help for VA claims
- Our best advice for how military members can start saving
- and much more.
Here is the YouTube video (and there is more detailed information and additional links below the video):
Saving Money on Deployments
Deployments are an interesting time for everyone involved. You live a life without a lot of luxuries, at a time when you are earning more money than you normally earn. The combination of doing without and having money in your pocket when you get home makes it easy for many military members to go on a buying spree when they return. A new truck, motorcycle, stereo system, or similar large expense seems logical at the time, but it can be painful in the long run, especially if you put it on credit.
Were you a saver while you were in the military?
- Jeff: Yes. He was already a financial planner for three years prior to his deployment to Iraq. Jeff shared a story about calling home to buy stock while he was deployed.
- Ryan: Yes, I was a saver. I was single while I was in the military, and I didn’t have many expenses. I deployed five times in six years, and used the money to fully fund my IRAs, invest in the Thrift Savings Program, and invest in the Savings Deposit Program.
Roth Thrift Savings Plan & Investing
Ryan: The Roth TSP is new, but there are a lot of questions about it. Like IRAs, there are two versions, and they are similar to each other. With the Traditional IRA or Traditional TSP, contributions are made before the income has been taxed. The money grows until retirement age, then it is taxed when you make withdrawals. The Roth TSP and Roth IRA are the opposite. The contributions are made after taxes have been withheld, and you can make tax-free withdrawals in retirement age.
There are some huge benefits to investing in the Roth IRA or Roth TSP. For example, you can make Roth TSP contributions while deployed. The benefit of this is you are making an “after tax” contribution with tax free money. Meaning your contributions will NEVER be taxed – either now, or when you make the withdrawals in retirement age. The other benefit concerns tax brackets. If you are in a lower tax bracket now, the Roth is generally the better way to go. This is because yo will pay a low tax rate now, and avoid taxes later. This is important because we don’t know what tax rates will be when we reach retirement age. Chances are good that taxes will be higher in the future.
Jeff: Jeff gives examples of how turning a $30,000 investment into a $250,000 nest egg that is tax free. It’s an amazing possibility. But it takes the discipline to get started.
Jeff also shared that you don’t need much money do you need to start investing. You can do it with $25 or $50 a month. The key is to make the commitment and get started.
We covered a few topics for military taxes, including the tax deadlines. It’s important to know that April 15th is the deadline to file and pay anything you may owe to the government. However, you can file an extension which will allow you to file by Oct. 15th, which is the extension deadline. Money due by April 15th, regardless of whether you file an extension.
Military extensions: Military members who ares stationed overseas or deployed are eligible for an automatic extension. However, the IRS may not know you are overseas or deployed, so be sure to file an extension. This is free and easy to do – you can do it with tax software, or by filling out a simple from from the IRS. Here are tips for filing a tax extension.
More tax tips:
Thanks so much to Veterans United for inviting Jeff and I to their Google Hangout