Welcome to Day Eleven of the 30 Day Financial Transition Challenge. Today’s article focuses on your retirement accounts.
Bottom Line Up Front (BLUF)
Most military members and their families invest significantly in the Thrift Savings Plan, as well as individual retirement accounts (IRAs). As you transition, it’s important to consider the changes to your retirement accounts and your ability to contribute to them. Today is the first day we’re going to take a look at your investments. Later on in this series, we’ll take a look at your after-tax accounts. Once we do this, it will help you determine how it comes together.
For your entire military career, you’ve been eligible to contribute to one of the lowest-cost retirement plans in the world. Your next career choice might also modify your ability or inclination to contribute to a retirement plan. For example, if you’re starting a business, you might decide to make more money available to support your business plan. Conversely, if you become a government employee, you might find very little change, other than setting up a civilian TSP account. Whatever you do, you’ll want to make sure that your retirement accounts continue to grow in a way that’s consistent with your post-military goals.
Your goal should be to figure out:
- How much you’re currently contributing, and into what types of retirement accounts
- How your contributions will change when you leave active duty
- What you need to do to properly balance your retirement goals with your financial needs over the first couple years after your transition.
We’re not going to solve all the questions today. This is the first in a three-part exercise designed for you to get a handle on all of your investments. On Day 13, we’ll take a look at your after-tax accounts, and on Day 18, we’ll look at your investment management philosophy. Looking at your investment management philosophy is the first step in figuring out how it all comes together. By the end of Day 18, you should have a good handle on whether you’re on the right track, or if you need to hire a financial planner to help you put it all together. But first things first.
- Thrift Savings Plan Overview
- How to Manage Your Thrift Savings Plan
- Personal Capital Review – Free Wealth Management Software
What you need
Your LES, TSP statements, & IRA account statements (Roth & Traditional IRAs). Log-ins to all your financial accounts.
This exercise consists of a simple checklist of questions to help you better understand your retirement account balances and your monthly contributions.
1. How much are you saving (Day 1)? How much additional money can you save? We’re not making decisions today, we’re only using our accumulated information to figure out what we could do.
2. What type of retirement account are you saving to?
- Consider the tax implications of pre-tax & post-tax accounts
- Are you maxing out your TSP?
- Are you eligible for an employer retirement plan? Do they provide a matching contribution?
- Are you saving to more than one type of account?
3. Record your accounts in one place.
- Mint & Personal Capital are two free ways to aggregate account data
That’s it for today. We’ll build upon this after we figure out your after-tax accounts. We will purposefully build in a few days between now and then so we don’t lose sight of the big picture. It’s easy to become singularly focused, particularly when it comes to investments. We’ll circle back and put everything together, but not all at once.
To wrap up, today you’re going to:
- Figure out how much you’re saving towards retirement
- Get a handle on your retirement account balances
- Record them in a system that works for you
Tomorrow, we’ll discuss how your post-military health care will look. Figuring out how you’ll be able to continue health care for yourself and your family is a very important consideration during your transition.