Whether You’re In Or Out, Start Planning Your Civilian Retirement Now

June 29, 2018

By Task & Purpose

Alright, so you're thinking about your long-term financial security. Maybe you're tired of making the rounds like a MARPAT-clad Oliver Twist, cover in hand, begging for more, please, so you can afford your monthly phone bill and streaming service payment.

Whether you're a belligerent E-4 rounding out your first enlistment before you move on to greener pastures in the 1st Civ Div, or you're going to stick in the service a while longer, it's a good idea to plan for the future. And really, who doesn't want to prepare for a day when your POD calls for you to sit on the beach, drink cocktails with small umbrellas in them, and answer every question with “What do I care, I'm retired”?

To help you get there, we spoke with military veteran financial experts and compiled some top tips for retirement and long-term investment planning.

Sorry champ, you're not gonna live forever - and SGLI doesn't stick around after the military.

While Servicemembers' Group Life Insurance is one of the best plans out there - you get a fixed rate, regardless of age and health - it's exclusively available to the military, which means you can't take the policy with you when you leave the service.

“It's a good idea to lock up an inexpensive term life insurance policy when you are young and the policy is relatively inexpensive,” says Ryan Guina, an Air Force veteran, guardsman and the founder of The Military Wallet, a financial news site geared toward service members.

Think about paying into a new policy that covers the military - not all do - just before you get out of the service; that way there'll be no gap in coverage.

Buy a house, or nah?

Sure, the military provides you with base quarters or a housing allowance, but knowing which one to choose can be tough. It might feel like a waste not to use your housing allowance to buy a home, but homeownership comes with its own risks.

“Many military members frequently relocate, leaving them on the hook to either sell their home - often on short notice - or to become a long-distance landlord,” Guina tells T&P. “I've seen people do very well with real estate, and I've seen people lose a small fortune.”

If you can afford to manage a property at a remove - or to just hang on to it until the market's in your favor - then buying might be the smart play. But take a sober assessment of your own financials and comfort zone first. “It's almost impossible to make a blanket statement regarding whether someone should buy or rent,” Guina says, “so the best advice I have is to do a lot of research before making your decision.”

Start pouring cash into retirement plans while you're in…

…Because, by and large, retirement plans are bupkis in the private sector, especially when you start your post-mil career. It helps to start putting cash into retirement when you're young, have a steady paycheck, and decent retirement options… i.e., when you're still in the military. But there's no time like the present.

“I recommend everyone start investing for retirement right away,” Guina says. “The benefit of starting young is having more time for compound interest to work its magic. The more you invest today, the less you will need to invest later.”

Here are a few retirement options to consider:

Thrift Savings Plan: A longtime perk for government employees, the TSP “offers incredibly low-cost index funds that track several major stock indexes,” Guina says. “This gives you pieces of hundreds of different companies, increasing your diversification. Investments in the TSP simply track the overall markets. Over time, the markets tend to go up.”
Individual Retirement Arrangement: This is how most civvies are saving, when they can. “You have more control over how you invest the funds, which can be both a blessing or a curse, depending on your investment acumen,” Guina says. “I recommend sticking with the TSP until you have a good handle on investing, and can manage an IRA on your own.”
Taxable investment accounts: “While investing for retirement is great, you may not wish to lock up all your investments in a retirement account where you can't access the funds without penalty,” Guina says. “This is why investing in a taxable investment account is a good idea. This will allow you to save for longer term goals that may be 5-10 years out, instead of the 20-40 years for retirement.”

If you're already out, you still have plenty of options.

If you've already left the service and have an emergency fund set up ( read how best to squirrel away cash for your “oh shit I'm unemployed” savings account, here), it's a good idea to consider an employer sponsored retirement plan, like a 401K, or 403B says Curtis Sheldon, the lead financial planner of C.L. Sheldon & Company and a former Air Force fighter pilot.

You should plan to put roughly 10% of your monthly earnings into retirement, Sheldon says, “and hopefully you'll get some employer-matching, as well.”

If the idea of actively investing is too overwhelming, just put it on autopilot.

“It's really really hard to try to beat the market,” Sheldon continues. “So you're much better off just investing for the long term - and there's nothing wrong with being just a passive investor. You're going to have some up days and some down days. And people will say that if it goes up, it's going to come down, but if you look at the stock market since 1929, in the short term it's gone down, but over the long term it's only gone up.”

Regardless of how you choose to invest, just make sure you actually do it.

“The biggest single predictor of your success is getting started, and getting started now,” Sheldon says.“There's an example a lot of people use to show the magic of compound interest and it's this: You start with a penny and you double it every day for a month. The first day you have one penny, the second day you have two, the third day you have four. At the end of the month you'll have $10,000,000. But if you start one day later, you don't lose a penny, you lose $5,000,000.”

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