Saving/Investing in the Military

Not an expert on the subject matter (I'm sure some smart PWM guys will come along to share wisdom though), but I would recommend you take a look at well-diversified ETF's with good track records. These could give you decent return without having to wait too long until redeeming your funds. Best of luck!

if you want to put money away for 4 years and no more, put it in cash and short term bonds. FWIW, it's a bit silly to say you want to get a head start on your finances and then spend the money afterwards. if you're talking about getting a head start on your rainy day fund, fine. I'd just have the money go to USAA (you guys should have a deal with them) and have them automatically purchase whatever their short term bond fund is or let it go to cash. if I knew I was going to be spending this money in 4 years, I'd just have it go to cash.

if you're talking about actually investing the money for use much later, that's a different story. I think you guys have free access to USAA advisors, so get them to walk through an investment plan that's tailored to you.

Just want to chime in that USAA is great.

Would just add that if you do plan to actually invest, a Roth IRA could still be a good structure since you can withdraw contributions penalty-free, and gains are also penalty-free (but do incurred tax, which at least you've deferred) for qualified education expenses or a first-time home purchase.

Thanks for the help guys, might end up doing both routes

Great advice so far. And you've got a few things going for you.

1) USAA is indeed great, even now when people try to sell me insurance products, I mention I have USAA and they're like yeah, I can't beat them. Run from any other financial services/banking company catering to military, the rest are shady IMO. 2) Enlisted sailors get paid too little, but if you live on base, you can budget in drinking/screwing around money and still bank. Let your buddy buy the second round, because he will. 3) I don't know how the post-9/11 GI Bill works for you new guys, but figure out how to set yourself up to get the best college benefits, even if you're not thinking of college now. It's another huge financial benefit from your service.

Good luck, hope you get some interesting, non-Middle East deployments.

I don't know what your pay grade is, but you may qualify for the savers' credit:

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retireme…-(Saver%E2%80%99s-Credit)

Depending on your AGI for the year, this could save you $1000 if you earn less than $18,000 or $200 if you earn less than $29,000.

Very few people get to take this credit. Full-time students can't get it. People who work in finance generally make too much. Most people earning less than $29,500 can't save money. But if you're serving in the military, you often have fewer expenses than other people. You have a low AGI... and the ability to make retirement contributions.

If you contribute to a Roth IRA, your earnings aren't taxed if you make a qualifying withdrawal. You can withdraw your original contribution at any time, and if the withdrawal is made to pay for the first $10,000 of down-payment on a house, you can also withdraw any earnings tax free and without penalty. You can also make penalty free (not tax free) withdrawals to pay for tuition that you don't receive tax-free benefits on, although these withdrawals would be taxable as ordinary income.:

http://www.irs.gov/publications/p590/ch02.html#en_US_2013_publink100023…

Some consideration should also be given to Series I Savings Bonds. I call this kind of investment "The Federal Government's Subsidy for middle-class savers" TIPS are trading at a negative inflation-adjusted return right now, but Series I savings bonds will pay you inflation + 0.2%. After a year, you can pull your money out at any time and you're generally earning much better interest than you can in the bank.

2nd the advice on the GI bill. I knew a lot of ex-military guys at UIUC getting free engineering degrees on the GI Bill. If you can land a job as a technician or better, working in Naval Reactors, you will have a lot of options to get an engineering degree upon graduation.

That's about all I've got here. The Navy may have a number of savings schemes designed to help you a lot more that traditional finance people aren't aware of. In the corporate world, you often get a match for contributing to an employer retirement plan (401k or 403b), and the Navy may offer something similar for you. You should definitely look into that. Beyond that, the two things I can add to this discussion are the savers' credit (depending on your pay) and Series I Savings Bonds.

As far as short term investing, I really like Lendingclub.com Normally its hard to invest when you have a little amount of money to invest because all of it gets eaten up with fees etc but since lending club just takes a percentage of the gains you don't end up losing a large % of your invested money. Plus you can invest in lots as small as $25

Also look into commission free / no load mutual funds or ETF's

Its a good way to make money, but as will all investments there is always a chance of losing money. Where as you wont lose cash in a savings etc.

Good comments.

I'll echo, USAA is pretty good (military brat here). And definitely take advantage of the post-9/11 GI Bill like someone mentioned.

Good luck.

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