Here’s What Every Military Member Must Do to Secure Their Financial Future

Did you know that fewer than 1 in 5 military members stay in long enough to receive an active duty pension? Only 17% of servicemembers reach that milestone. Even if you do earn a military pension, it may not be enough to support you in retirement. That means you need to plan your own retirement.…
Advertising Disclosure.

Advertiser Disclosure: Opinions, reviews, analyses & recommendations are the author’s alone. This article may contain links from our advertisers. For more information, please see our Advertising Policy.

FutureAdvisorEnter your age, retirement age, and risk tolerance.

Did you know that fewer than 1 in 5 military members stay in long enough to receive an active duty pension? Only 17% of servicemembers reach that milestone. Even if you do earn a military pension, it may not be enough to support you in retirement.

That means you need to plan your own retirement. A good place to start is with the military Thrift Savings Plan or an IRA. You could also contribute to a 401k plan after you leave the military, or start a taxable investment account. But where should you start? Which investments should you buy? And how do you measure your progress?

Military Retirement Planning

These are all great questions. Managing an investment portfolio can seem difficult, especially if you have more than one account. For example, my wife and I have an investment portfolio that contains two Roth IRAs, two 401k plans, two Thrift Savings Plan accounts, and a taxable investment account. In a perfect world, I would be able to consolidate those accounts, but at the moment, I can’t. So I need to find a way to manage them all without spending a lot of time or money. Thankfully, I recently found a free tool that helps me do just that.

Before I show you how I use the tool, I’d like to address some of the challenges many investors face when managing an investment portfolio. Then we’ll look at how to address those challenges so you can more easily adjust your portfolio, reduce your risk, and improve your investment returns.

Learn how to plan and manage your investment portfolio for free at FutureAdvisor.

Problems All Investors Face:

  • Asset Allocation (mix of stocks, bonds, and other investments)
  • Investment Fees
  • Taxes

Let’s take a brief look at each of these problems, then I’ll show you how I solve them:

Asset Allocation: Where You Put Your Money

Asset Allocation - FutureAdvisor
Proper asset allocation can improve your returns.

Asset Allocation is the mix of investments in your portfolio. This will often include investment types, such as stocks, bonds, Real Estate Investment Trusts, and other investments. The goal is to address your overall risk. I’m sure you’re familiar with the term, “don’t keep all your eggs in one basket.” This is where asset allocation comes into play.

Asset Allocation can be difficult when you have multiple accounts, such as my situation. One way to make this easier is to treat all of our investments as “one large bucket” instead of a bunch of small buckets. So if we decide we want an asset allocation of 70% stocks and 30% bonds across our entire portfolio, we can have some accounts that are 100% stocks or 100% bonds, so long as the overall portfolio averages out.

Investment Fees: When Less is More

Many people underestimate the importance of investment fees. A difference of only 1% can mean the difference of tens of thousands of dollars, or even hundreds of thousands of dollars in the long run. That is why my wife and I still have two TSP accounts – the TSP has some of the lowest fees you will find anywhere. It would cost us money to move the funds from the TSP to a new account.

One of the easiest ways to improve your portfolio’s investment returns is by slashing fees. Moving an investment from a fund with high fees to a comparable fund with lower fees can improve your portfolio’s performance overnight, literally saving you thousands of dollars. Check out this chart which shows how fees add up over time – it’s shocking!

Investment Fee Comparison Chart
Keeping more of your money in your pocket now ensures a larger retirement portfolio.

Chart Assumptions: Two identical investment portfolios starting at age 25 with $10,000, annual contributions, a 5% annual return, and held until age 65. You can see the difference is over $250,000 – all from an additional 1% investment fee!

Taxes: Pay Now, or Pay Later

Tax efficient investments
Tax efficient investments save you thousands.

You will almost always pay taxes on your money. The question is when, and how much. Obviously the goal is to legally reduce how much you pay in taxes. That’s where retirement accounts such as 401k plans, Roth IRAs, the Thrift Savings Plan, and other retirement accounts come into play.

Some of these accounts, like Traditional 401k, IRA, and TSP accounts, allow you to contribute to your retirement fund before the money is taxed. It then grows tax-free until the day you decide to withdraw it in retirement, at which time it is taxed.

Roth accounts act the opposite way – you make contributions after your money has been taxed, then the funds grow until you reach retirement. Qualified withdrawals are tax-free. Which type of funds you place into each account can have a massive long-term impact on your investment portfolio’s performance.

Taxable investment accounts use funds that have already been taxed as income, the funds can be taxed as they grow, and you will pay taxes when you sell the investments.

How to Solve These Problems – Quickly & Easily

FutureAdvisorYou’ll notice I conveniently neglected to show you how to address these three major investment issues. I do it with a simple, and free, tool called FutureAdvisor.

Here’s how it works:

  • Sign up for a free account*
  • Connect your investment accounts to your FutureAdvisor account (don’t worry, they use bank-level security!)
  • Run the free Portfolio Analysis
  • Review the recommended actions based on your profile
  • Take action!

*FutureAdvisor is free, and there is no obligation. But they also offer a really cool premium version, which I’ll explain later. For now, I’ll focus on the value you can get from their free tool.

FutureAdvisor – Free Portfolio Analysis

I’d love to take a screenshot and walk you through the assessment from my investment portfolio, but that’s probably not the wisest thing to do. Instead, I’ll explain how it works.

First, open a free FutureAdvisor account, then choose your current age, estimated retirement age, and your risk tolerance (conservative, moderate, or aggressive). Here is a screenshot of the tool in action:

FutureAdvisor
Enter your age, retirement age, and risk tolerance.

You will see a recommended target portfolio including a breakdown of types of stocks and bonds (domestic, foreign, large cap, small, cap, and everything in between). You will also see the projected performance of your target investment portfolio (just understand that projections aren’t a guarantee of future returns).

Next, connect your investment accounts. When you connect your investment accounts, FutureAdvisor will compile a list of all your investments and take many factors into consideration, including:

  • The type of account (Roth, Traditional retirement account, taxable investments, etc.)
  • The asset class
  • Investment fees
  • and more.

Then, FutureAdvisor recommends certain actions to improve your portfolio and potential returns. For example, most of my investments were already in low-cost index funds and ETFs, which FutureAdvisor recommends as a way to control investment management fees. But my asset allocation needed to be adjusted based on my risk assessment.

So the FutureAdvisor tool showed me specifically which funds to sell from each account, and which funds to replace them with. This made it quick and easy to bring my portfolio into balance without worrying about getting my portfolio out of balance, or messing things up with taxes. Very cool for a free software program!

FutureAdvisor Also Works with the TSP

Thrift Savings PlanOne of the frustrations I’ve had with some investing software programs is they often ignore the Thrift Savings Plan. That’s not the case with FutureAdvisor. In fact, they recently updated their algorithms to specifically integrate the Thrift Savings Plan into their portfolio recommendations. This makes it much easier for military members and government employees to balance their portfolios, save on fees, and improve investment performance.

To use FutureAdvisor with the TSP, simply login to your FutureAdvisor account and enter your TSP login credentials. Again, FutureAdvisor uses bank-level encryption, so your information is safe. Once your data is synced, FutureAdvisor will perform a free portfolio analysis and make specific recommendations based on your situation.

FutureAdvisor Premium – Military Discount

As I mentioned earlier, all the previously mentioned features are free. This is the version I use to manage my investments. But I’m comfortable managing my investments and making trades on my own. If all of this is a bit over your head, or you don’t prefer to manage your own investments, then you may wish to consider FutureAdvisor’s premium service. Not only will they will perform all the same analysis for you, but they will make the trades for you. (The Premium Service also has additional features such as tax loss harvesting).

Military Discount. The good news is that FutureAdvisor is offering their Premium Wealth Management solution to military members and veterans for free for a limited time.

Here is the military discount currently offered by FutureAdvisor:

You must begin the Premium enrollment process before Dec 31, 2014 to receive the discount.

Additional Bonuses for Military Members and Veterans

FutureAdvisor has also created a series of educational tools that will be hosted on their website. These include some upcoming webinars on “Personal Finance for Military members” and also a “Train the Trainer” webinar to help train supervisors and field commanders to help them educate their junior members about personal finance.

And of course, the aforementioned Thrift Savings Plan integration. FutureAdvisor has integrated the Thrift Savings Plan accounts into their algorithm in order to provide the most comprehensive advice for service members. This includes in-plan recommendations for the TSP—something they haven’t done for any other clients.

Try FutureAdvisor for Free. Overall, I’ve been very happy with FutureAdvisor’s software. It makes it easy for me to see how well my entire investment portfolio is balanced, and helps me look for ways to manage expenses and keep more money in my pocket. Visit FutureAdvisor to learn more or to open a free account.

Get Instant Access
FREE Weekly Updates! Enter your information to join our mailing list.

Posted In:

About Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Illinois Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

Featured In: Ryan's writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine (print and online editions), Military Influencer Magazine, Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.

Reader Interactions

Comments

    Leave A Comment:

    Comments:

    About the comments on this site:

    These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

  1. Jennie Samstag says

    Is there a fee from a high ranking officer from the customs dept. to return from A country they have been serving in Syria and to get their portfolio. Just a question

    • Ryan Guina says

      Hello Jennie,

      Absolutely not. This is a variation on a scam. 

      Never send anyone money if you have never met them in person. Better yet, never send money to anyone who isn’t immediate family. There are too many scams out there, and people posing as U.S. military members is a common scam.

      The best thing to do is to cut off all communication with anyone asking for money. Don’t have further communication, as it will only result in more lies and manipulation.

      I wish you the best.

  2. FinanceQA says

    This post is quite helpful, Ryan. I think these tips work for anyone who wants to manage investments effectively. Diversifying your account and checking out the taxes earlier on is important. Civilians should also take a cue from these tips.

The Military Wallet is a property of Three Creeks Media. Neither The Military Wallet nor Three Creeks Media are associated with or endorsed by the U.S. Departments of Defense or Veterans Affairs. The content on The Military Wallet is produced by Three Creeks Media, its partners, affiliates and contractors, any opinions or statements on The Military Wallet should not be attributed to the Dept. of Veterans Affairs, the Dept. of Defense or any governmental entity. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. The content offered on The Military Wallet is for general informational purposes only and may not be relevant to any consumer’s specific situation, this content should not be construed as legal or financial advice. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss. References to third-party products, rates and offers may change without notice.

Advertising Notice: The Military Wallet and Three Creeks Media, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet; For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked and this compensation may affect how, where and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings or lists are fully comprehensive and do not include all companies or available products.

Editorial Disclosure: Editorial content on The Military Wallet may include opinions. Any opinions are those of the author alone, and not those of an advertiser to the site nor of  The Military Wallet.