Requesting Guidance - 29 y/o military investor

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Topic Author
Kragfromprague
Posts: 6
Joined: Thu Jan 10, 2019 4:23 pm

Requesting Guidance - 29 y/o military investor

Post by Kragfromprague » Thu Jan 10, 2019 5:04 pm

First time poster seeking advice with regard to my ~2 week old Vanguard Roth IRA Account and Vanguard Taxable Brokerage Acount
:sharebeer
I am an Active Duty Military Officer (6 years in) who opted into the new Blended Retirement System (401k match 5%) early on and I now max my Roth Thrift Savings Plan (TSP) monthly.

What I currently hold:

- 50k in the military Roth Thrift Savings Plan (70% held in C Fund / 30% held in S Fund) with a new monthly Contribution Allocation of 60%C/40%S going in. The military matches 5% monthly on top of my contributions to meet the 19k maximum for 2019 401k. Should I possibly be more diversified to include more International (I Fund) into my portfolio while it is considered relatively cheap now?

- I also had a Roth IRA with USAA (~15k) but after learning of their high expenses, I moved it over and rolled it to Vanguard’s Roth IRA last week (monies were in SWPPX, transfer to Vanguard still pending, so seeking advice for how to allocate that Vanguard Roth IRA once it hits next week) for an aggressive 29 y/o investor...I can max contributions now for 2019 as well, right? 2018 is maxed already.

- I have an Emergency Fund with USAA (~25k) that I’m looking to move into a potentially high yield savings account, but still have relatively accessible, as my USAA savings account only yields 0.10-0.20% and I want it a bit more “out of sight” so I don’t touch it, but would like to take advantage of a 2.00-2.25% rate. Any advice on that end would be extremely appreciated. A few I’ve read up on include AMEX, Barclays, Ally, Allegiant and Synchrony.

- My new Brokerage Account includes the following: UGMA funds transferred to me recently (~3k) sitting in VFINX now (no longer UGMA, regular brokerage). ~1k in VTI and ~1k in VOO (just learned these are nearly duplicates? Should I consolidate all into VTI?) and ~100.00 in VXUS.

I am trying to build a simple, yet well-diversified and aggressive portfolio and I could use some guidance and opinions, as you more experienced folks can see, I’m a bit all over the page and I would like to get a good way forward for a consistent and well-rounded aggressive portfolio (more bonds/real estate/international?)

Also, should I not be messing with the ETF’s? Seems like a monthly chore to invest into each fund, granted I just started, but just thinking...traditional index funds allow auto-investing, right? Even though you have to get the set price at close of day. Would simple index funds potentially better suit my investment style? I am more of a B&H investor and want to set it and forget the password as some have said on here.

I’m sorry for the word vomit, just excited that I found this forum and I’m able to hopefully move in the right direction from here to attain early retirement after my military service. I’m all ears and I’m sorry if this post broke any of the forum rules!? :oops:

carmonkie
Posts: 47
Joined: Fri Jun 29, 2018 4:31 pm

Re: Requesting Guidance - 29 y/o military investor

Post by carmonkie » Thu Jan 10, 2019 6:07 pm

Thank you for your service!!
Kragfromprague wrote:
Thu Jan 10, 2019 5:04 pm
First time poster seeking advice with regard to my ~2 week old Vanguard Roth IRA Account and Vanguard Taxable Brokerage Acount
:sharebeer
I am an Active Duty Military Officer (6 years in) who opted into the new Blended Retirement System (401k match 5%) early on and I now max my Roth Thrift Savings Plan (TSP) monthly.

What I currently hold:

- 50k in the military Roth Thrift Savings Plan (70% held in C Fund / 30% held in S Fund) with a new monthly Contribution Allocation of 60%C/40%S going in. The military matches 5% monthly on top of my contributions to meet the 19k maximum for 2019 401k. Should I possibly be more diversified to include more International (I Fund) into my portfolio while it is considered relatively cheap now?


- I also had a Roth IRA with USAA (~15k) but after learning of their high expenses, I moved it over and rolled it to Vanguard’s Roth IRA last week (monies were in SWPPX, transfer to Vanguard still pending, so seeking advice for how to allocate that Vanguard Roth IRA once it hits next week) for an aggressive 29 y/o investor...I can max contributions now for 2019 as well, right? 2018 is maxed already.

If you are looking at adding INT equities, you can use the Roth to do so. The Roth will be part of your overall portfolio so nothing wrong holding those assets here. Some will tell you that INT should go in taxable in order to claim the foreign credit, it all depends what space you have to fill. Typically you want growth equities in Roth as those grow tax free.
https://www.bogleheads.org/wiki/Tax-eff ... _placement



- I have an Emergency Fund with USAA (~25k) that I’m looking to move into a potentially high yield savings account, but still have relatively accessible, as my USAA savings account only yields 0.10-0.20% and I want it a bit more “out of sight” so I don’t touch it, but would like to take advantage of a 2.00-2.25% rate. Any advice on that end would be extremely appreciated. A few I’ve read up on include AMEX, Barclays, Ally, Allegiant and Synchrony.
Vanguard Prime Money Market. It helps you consolidate further. Ally no penalty CD seems to have traction around here.


- My new Brokerage Account includes the following: UGMA funds transferred to me recently (~3k) sitting in VFINX now (no longer UGMA, regular brokerage). ~1k in VTI and ~1k in VOO (just learned these are nearly duplicates? Should I consolidate all into VTI?) and ~100.00 in VXUS.
VFNIX and VOO track the same index. You need to decide if you want the Mutual Fund of the ETF.
VTI is the Total Stock Market and has the mid-cap and small cap component that S&P500 lacks and for that reason would be preferred. Assuming there are no tax implications, it would be OK to move to the Total Stock Market.



I am trying to build a simple, yet well-diversified and aggressive portfolio and I could use some guidance and opinions, as you more experienced folks can see, I’m a bit all over the page and I would like to get a good way forward for a consistent and well-rounded aggressive portfolio (more bonds/real estate/international?)
I think an aggressive portfolio is defined based on the stock to bond allocation. A 100% stock portfolio would be very aggressive, but can you stomach a 30%-50% drop? A 3-fund portfolio is well rounded as it captures US/INT/Bonds, but it is the stock/bond allocation that makes it that much or less aggressive. I would suggest before making any other transactions, is that you come up with your Asset Allocation plan. How much do you want in Bonds and Stocks and how much of the stock part you want in INT. Take a look at the Target Funds and how they allocate stocks and bonds. You might even say, those are for me and be done with this. :happy

Also, should I not be messing with the ETF’s? Seems like a monthly chore to invest into each fund, granted I just started, but just thinking...traditional index funds allow auto-investing, right? Even though you have to get the set price at close of day. Would simple index funds potentially better suit my investment style? I am more of a B&H investor and want to set it and forget the password as some have said on here.

If you stick with the index ETFs, there is nothing wrong with them, the buy and sell spread is very small and have high liquidity. The downside is that you can only trade whole shares. I like being able to add odd amounts. That being said I do own a couple of ETF, because I did not have the funds at the time to invest the minimum, so I just kept them.

I’m sorry for the word vomit, just excited that I found this forum and I’m able to hopefully move in the right direction from here to attain early retirement after my military service. I’m all ears and I’m sorry if this post broke any of the forum rules!? :oops:

Fishing50
Posts: 295
Joined: Tue Sep 27, 2016 1:18 am

Re: Requesting Guidance - 29 y/o military investor

Post by Fishing50 » Sat Jan 12, 2019 7:46 am

You're doing a great job, keep saving!

BRS is a good deal, but you need TSP contributions also. If you cannont afford to max out TSP, never drop below the max match. You should be contributing as least a portion to Roth TSP because your future pension will increase the tax bracket on TSP distributions when you retire. https://thefinancebuff.com/most-tsp-par ... h-tsp.html Definitely make Roth TSP contributions if you deploy to the combat zone and consider reaching the max of $56K.

All accounts make up the entire portfolio. 20-40% of equities in international is reasonable. I prefer 20% which Jack Bogle says should be the upper limit. Vanguard and other large mutual fund companies recommend 40%.

Tax efficient placement is easy for Military Members https://www.bogleheads.org/wiki/Tax-eff ... _placement

1. Invest most of your emergency fund and UGMA in taxable. Keep only equities in taxable account, total market equity index funds or total international equity index funds work great. I prefer mutual funds because any dollar amount can be automatically invested each month. I tax loss harvest between S&P 500, total stock market index, and large cap index funds.

2. Keep entire bond allocation in TSP G or F Fund. 0-20% is reasonable at your age.

3. Roth IRA should be allocated toward growth to take advantage of long term, tax-free compound growth. Equities is probably enough, but you can add REITs, emerging markets (not as relevent anymore since I Fund will soon include emerging markets), or other tilts you desire. Yes, you can contribute $6000 now for 2019.

4. Allocate TSP to reach your desired allocation. C Fund and S Fund 4/1 to match the total market index.

I don't believe military members needs a large emergency fund as other because absent severe misconduct, the next paycheck is darn near guaranteed. A couple thousand dollar savings account is enough for a car repair or a roundtrip plane ticket home if something devastating happens. After that get your money invested, time in the market enhances performance. If you need to pay for unforeseen expenses, savings rate can be temporarily decreased until the bill is paid. Late in my career, we don't have an emergency fund, but I did get $1K of dividends deposited into my money market account in the last 30 days because we don't reinvest dividends in taxable. If you are saving for a goal such as a new car, that savings should not be invested.

Set up automatic purchases in taxable and TSP to keep your asset allocation, but you probably never need to rebalance allocation during accumulation years. Every couple months you can adjust the automatic purchases, to purchase which ever asset class is low. Summer 2018 our bond allocation was low due to high performing stock market, so TSP was purchasing G Fund. Jan 2019 our stock alloction is low due the correction, so I switched TSP to purchase stocks. Through my career I've done the same with small cap and international. :beer
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

Topic Author
Kragfromprague
Posts: 6
Joined: Thu Jan 10, 2019 4:23 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Kragfromprague » Sat Jan 12, 2019 1:44 pm

Carmonkie,

Thank you for your great reply and I apologize my first post was not in the proper format with percents, formats, etc. I'm still relatively new to this investing thing and after reading a few other portfolio posts, I soon realized I should snag a few books that were suggested, get my allocations in order and put together a better plan to move forward and draft a better post down the line.

So a 70% C Fund / 30% S Fund in my Roth Thrift Savings Plan (401k w/5% match) isn't too aggressive at my current age/military rank and position? I'm young, so I can be aggressive; however, I also want to be smart and incorporate bonds into my profile where they need to be (based on taxes and returns), in the event of a 2008. With that being said, from what I gathered and what you mentioned, bonds (G Fund) should be held in my TSP at some point while young (0-20%) and that should suffice for my entire portfolio, to include those accounts outside of TSP? Or I am wrong to say that?

I am going to max my Roth TSP for 2019 (will have to bump up my last few months to offset current percents) as I currently contribute 20% of my base pay ($1158/mo with a $290/mo Uncle Sam match).

So, you suggest dumping my entire EF into the Vanguard Prime Money Market versus a high yield savings account such as Marcus or Ally?

I will consolidate both the VFINX and VOO into the VTI fund to simplify things; however, I would love to set up an auto distribution and I can't do that with VTI, which turns me away from ETF's a bit. Do you have any fund suggestions for a Taxable Account? What are your thoughts on the Target Retirement Fund 2065 for me? Also, can I simply move funds from VFINX and VOO into VTI on any day (today?) Does it matter whether it is a Red or Green Day?

My current stock to bond portfolio (from what I've researched and seen) should be 80% stocks / 20% bonds, of that 80% stocks, 20% (not too informed on international funds) would be international. Does that sound far off from other young Bogleheads?

Thank you again, Carmonkie! Look forward to hearing back.

------------------------------------------------------------------------------------------------------------------------------
Fishing 50,

Thank you so much for your detailed response; as y'all can see I'm not the best at breaking down each piece of the response as others do, so I apologize for that!

As mentioned above, I do and have (for the last year) been getting the Max BRS/Thrift Savings Plan match (5%). I started with all of my allocations in L2050, but soon learned the Thrift Savings Plan Lifecycle 2050 fund was not nearly aggressive enough compared to Vanguard Retirement Target Funds, so I moved my TSP Holdings to 70%C/30%S Funds approximately three weeks ago (good timing). However, you mentioned bumping up Bonds (G Fund) in my TSP...what would you suggest for a aggressive yet healthy split in there? Should I start to buy I Fund's now with my new Contributions as they will soon incorporate emerging markets and potentially grow further?

After reading through pages of bogleheads posts last night, I am seriously considering the Vanguard Target Retirement 2065 Fund (I am 29, but I think it would be smart to both simplify my portfolio while maximizing the aggressiveness of the portfolio with this fund). Would the Target 2065 provide good returns as compared to a 3-Fund portolio? What are the big differences?

What are y'alls thoughts on incorporating VLXVX into both my Roth IRA (100%), as well as throwing my Emergency Fund and UGMA monies (15k) at this same fund too? Looking at its portfolio/breakdown, it incorporates a very similar investment strategy that I've heard preached so often on here...simplify, right? Isn't that what Vanguard is all about? :)

Thank you for your responses and please, anyone else with advice for a way forward would be greatly appreciated! Until then, waiting on this snow storm to come! :beer

abracadabra11
Posts: 112
Joined: Sat May 01, 2010 2:09 pm

Re: Requesting Guidance - 29 y/o military investor

Post by abracadabra11 » Sat Jan 12, 2019 2:10 pm

I'll admit ignorance since I'm on the old system and not BRS. But are you sure that you can't max TSP and then get matching contribution above that? My wife's 401k works this way, so we're able to put ~25k/year with the company match. It's a nice expansion of tax deferred space.

Topic Author
Kragfromprague
Posts: 6
Joined: Thu Jan 10, 2019 4:23 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Kragfromprague » Sat Jan 12, 2019 2:30 pm

abracadabra11 wrote:
Sat Jan 12, 2019 2:10 pm
I'll admit ignorance since I'm on the old system and not BRS. But are you sure that you can't max TSP and then get matching contribution above that? My wife's 401k works this way, so we're able to put ~25k/year with the company match. It's a nice expansion of tax deferred space.
Abracadabra11,

Usually folks break it up per month so you don’t go over on TSP and lose out on the match those last few months. That’s correct, as long as you don’t max too early, the contributions from the Gov’t don’t go towards the 19k max and they get dumped into a Traditional TSP account “age appropriate” Lifecycle Fund, correct me if I’m wrong anyone out there!

However, I can bump up my last few month %s to ensure I max without going over once more monies come available.

dharrythomas
Posts: 917
Joined: Tue Jun 19, 2007 4:46 pm

Re: Requesting Guidance - 29 y/o military investor

Post by dharrythomas » Sat Jan 12, 2019 5:23 pm

Kragfromprague wrote:
Sat Jan 12, 2019 2:30 pm
abracadabra11 wrote:
Sat Jan 12, 2019 2:10 pm
I'll admit ignorance since I'm on the old system and not BRS. But are you sure that you can't max TSP and then get matching contribution above that? My wife's 401k works this way, so we're able to put ~25k/year with the company match. It's a nice expansion of tax deferred space.
Abracadabra11,

Usually folks break it up per month so you don’t go over on TSP and lose out on the match those last few months. That’s correct, as long as you don’t max too early, the contributions from the Gov’t don’t go towards the 19k max and they get dumped into a Traditional TSP account “age appropriate” Lifecycle Fund, correct me if I’m wrong anyone out there!

However, I can bump up my last few month %s to ensure I max without going over once more monies come available.
Thank you for your service.

Your matching funds in the TSP should be invested using the same allocation as your contributions. You could easily do Target Retirement and Life Cycle funds and not worry about it.

BRS is great particularly since 80+% of the people who served in the military never received any retirement under “cliff vesting”.

Good luck.

Fishing50
Posts: 295
Joined: Tue Sep 27, 2016 1:18 am

Re: Requesting Guidance - 29 y/o military investor

Post by Fishing50 » Sun Jan 13, 2019 3:51 am

Kragfromprague wrote:
Sat Jan 12, 2019 1:44 pm
Carmonkie,

My current stock to bond portfolio (from what I've researched and seen) should be 80% stocks / 20% bonds, of that 80% stocks, 20% (not too informed on international funds) would be international. Does that sound far off from other young Bogleheads?
Yes, 80/20 is good with 20% international. My original post provides allocation priorities to keep the entire portfolio in balance.
Kragfromprague wrote:
Sat Jan 12, 2019 1:44 pm
Carmonkie,
With that being said, from what I gathered and what you mentioned, bonds (G Fund) should be held in my TSP at some point while young (0-20%) and that should suffice for my entire portfolio, to include those accounts outside of TSP? Or I am wrong to say that?

I am going to max my Roth TSP for 2019 (will have to bump up my last few months to offset current percents) as I currently contribute 20% of my base pay ($1158/mo with a $290/mo Uncle Sam match).

Should I start to buy I Fund's now with my new Contributions as they will soon incorporate emerging markets and potentially grow further?
Yes, 20% F Fund and G Fund in TSP is sufficient for the overall portfolio.

You are max TSP match, but not max TSP. You can contribute $19K annually, government match is in addition to that number. Max for both contributions is $56K. In the combat zone you can make tax exempt contributions to max out the $56K.

Yes, I Fund is good for international exposure.

Kragfromprague wrote:
Sat Jan 12, 2019 1:44 pm
Carmonkie,
So, you suggest dumping my entire EF into the Vanguard Prime Money Market versus a high yield savings account such as Marcus or Ally?

Do you have any fund suggestions for a Taxable Account? What are your thoughts on the Target Retirement Fund 2065 for me? Also, can I simply move funds from VFINX and VOO into VTI on any day (today?) Does it matter whether it is a Red or Green Day?
Vanguard Prime Money Market is perfect for your emergency fund. No need for Marcus or Ally accounts now that money market accounts are paying 2% interest.

I recommend VTSAX Vanguard Total Stock Mkt Idx Adm and VTIAX Vanguard Total Intl Stock Idx Adm in taxable because they have qualified dividend distributions which have favorable tax rate of 15% and limited capital gains distributions.

Absolutely avoid target date funds in taxable because the bond portion will distribute dividends that are taxed as normal income and over time the bond portion grows to a larger percentage of the portfolio which compounds the problem. :oops:

Kragfromprague wrote:
Sat Jan 12, 2019 1:44 pm
Carmonkie,
After reading through pages of bogleheads posts last night, I am seriously considering the Vanguard Target Retirement 2065 Fund (I am 29, but I think it would be smart to both simplify my portfolio while maximizing the aggressiveness of the portfolio with this fund). Would the Target 2065 provide good returns as compared to a 3-Fund portolio? What are the big differences?
Vanguard Target Retirement 2065 Fund is a good option in Roth IRA account.
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

Maverick3320
Posts: 511
Joined: Tue May 12, 2015 2:59 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Maverick3320 » Sun Jan 13, 2019 8:01 am

Just out of curiosity - if you are planning to stay in until retirement, why did you elect the BRS?

Topic Author
Kragfromprague
Posts: 6
Joined: Thu Jan 10, 2019 4:23 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Kragfromprague » Sun Jan 13, 2019 8:57 am

Maverick3320 wrote:
Sun Jan 13, 2019 8:01 am
Just out of curiosity - if you are planning to stay in until retirement, why did you elect the BRS?
Maverick3320,

Great question, I used to ask myself that hundreds of times per week; however, I put a lot of time and research into my decision and I knew the earlier I opted into the system, the more money I could make up from the lower percentage pension down the line. At the time I opted into the system, I only had approximately 4.5-5 years of service and I was not 100% sure I would 1.) Enjoy and love my job for the next 15 years (at that time) and 2.) Not for some reason (stuff happens) get the boot from the military, i.e. Reduction in Force (RIF) boards...at the time I opted into the BRS, I wish I had found the Military Dollar blog (https://militarydollar.com), specifically these two posts helped reinforce my ideals:

https://militarydollar.com/2018/11/19/w ... rs-part-1/

https://militarydollar.com/2017/05/15/b ... g-systems/

Based on my specific job, I could at any time hop out and work for the Fed Gov't in some other capacity; with a few good friends that could help line up a job, I wanted to ensure I was building up my Roth 401k with extra matched "Uncle Sam Bucks" along this journey we call life. Not sure if I'll be able to stick out 20 years, I sure hope to; however, we simply never know, so why not snag some free matching along the way and have immediate vesting of it?

Please feel free to poke holes in my 29 y/o philosophy of this thing called investing :oops: ! I can't go back and change my mind, so I am locked into the Blended Retirement System; however, I'm interested in seeing how others view my decision.

Maverick3320
Posts: 511
Joined: Tue May 12, 2015 2:59 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Maverick3320 » Sun Jan 13, 2019 10:23 am

Kragfromprague wrote:
Sun Jan 13, 2019 8:57 am
Maverick3320 wrote:
Sun Jan 13, 2019 8:01 am
Just out of curiosity - if you are planning to stay in until retirement, why did you elect the BRS?
Maverick3320,

Great question, I used to ask myself that hundreds of times per week; however, I put a lot of time and research into my decision and I knew the earlier I opted into the system, the more money I could make up from the lower percentage pension down the line. At the time I opted into the system, I only had approximately 4.5-5 years of service and I was not 100% sure I would 1.) Enjoy and love my job for the next 15 years (at that time) and 2.) Not for some reason (stuff happens) get the boot from the military, i.e. Reduction in Force (RIF) boards...at the time I opted into the BRS, I wish I had found the Military Dollar blog (https://militarydollar.com), specifically these two posts helped reinforce my ideals:

https://militarydollar.com/2018/11/19/w ... rs-part-1/

https://militarydollar.com/2017/05/15/b ... g-systems/

Based on my specific job, I could at any time hop out and work for the Fed Gov't in some other capacity; with a few good friends that could help line up a job, I wanted to ensure I was building up my Roth 401k with extra matched "Uncle Sam Bucks" along this journey we call life. Not sure if I'll be able to stick out 20 years, I sure hope to; however, we simply never know, so why not snag some free matching along the way and have immediate vesting of it?

Please feel free to poke holes in my 29 y/o philosophy of this thing called investing :oops: ! I can't go back and change my mind, so I am locked into the Blended Retirement System; however, I'm interested in seeing how others view my decision.
Sounds like you made an informed decision. No holes to poke, at least as far as I can see. Congrats on being ahead of the game!

Topic Author
Kragfromprague
Posts: 6
Joined: Thu Jan 10, 2019 4:23 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Kragfromprague » Sun Jan 13, 2019 10:37 am

Thank you so much for the info/feedback! I just want to ensure I'm thinking about every possible way to get the most out of my investments at a relatively young age, am I missing anything big as a military member?

I already do Roth TSP (Aggressive split 70/30 split between C & S Funds, will incorporate some of the G fund within the next few years), Vanguard Roth IRA (will now go 100% into VLXVX - Vanguard Target Retirement Fund 2065), Vanguard Traditional Brokerage Account (will go solely into VTSAX and VTIAX, Emergency Fund (will be moving it to Money Market Fund this week (VMMXX). Specific amounts and percents to follow.

Additionally, I've seen tons of discussions about Health Savings Plans; however, as a military member with Tricare ($29/month) for full coverage, does this make sense as another avenue to work tax-deductible monies into? I'll keep reading up, but I wanted to throw it out while I had y'all on here. Thank you again.

spooky105
Posts: 106
Joined: Fri Aug 14, 2015 11:38 pm

Re: Requesting Guidance - 29 y/o military investor

Post by spooky105 » Mon Jan 14, 2019 9:31 am

A few years ahead of you, having recently crossed the 9 year mark. A few thoughts:

When looking at money market vs high yield savings for your emergency money I think it's worth considering that during the financial crisis there was dislocation in the money markets causing at least one fund to "break the buck" (lose money, even if temporarily). Money market funds are absolutely a conservative investment vehicle, but they are still an investment -- SIPC covers you in case Vanguard runs off with your money, but it does nothing to protect the value of the money you have invested. The cash I need in case of an emergency I keep in an FDIC insured high yield savings account (I use Ally & American Express). The yields are comparable, and I found that high yield savings accounts were paying a little better when the Fed interest rate was at 0% and money market accounts were roughly at 0% as well.

Health Savings Accounts are only applicable to high deductible health insurance plans, which Tricare is not. So not an option for you. I believe the $29/month you are referring to is your SGLI payment (life insurance).

As previously mentioned, a large emergency fund is less of a priority for military. Force shaping plays out over months and years -- nobody is going to swing by your office on Friday afternoon and tell you to clear out your desk. That said, align the savings with your life plans to stay or go.

To put on your radar for deployment:
1) You can drop $10k of your cash into the Savings Deposit Program after you've been down range for 30 days. It pays a guaranteed 10%, with the money tied up from when you deposit through your return home + 3 months. Not too shabby.
2) You can contribute up to $56k into trad TSP (DOD matching contributions count against this number) while deployed to a combat zone. In theory, you can make this contribution while still making your regular contributions throughout the year against your individual contribution limit of $19k to get the DOD match, but some folks have had issues with how finance/TSP processes these transactions. Given the tradeoffs, I'd probably lean towards making a massive trad TSP contribution during a deployment (even if it cost me some months of DOD matching) if the alternative is putting that money in a taxable investment account.

Topic Author
Kragfromprague
Posts: 6
Joined: Thu Jan 10, 2019 4:23 pm

Re: Requesting Guidance - 29 y/o military investor

Post by Kragfromprague » Mon Jan 14, 2019 11:25 am

spooky105 wrote:
Mon Jan 14, 2019 9:31 am
A few years ahead of you, having recently crossed the 9 year mark. A few thoughts:

When looking at money market vs high yield savings for your emergency money I think it's worth considering that during the financial crisis there was dislocation in the money markets causing at least one fund to "break the buck" (lose money, even if temporarily). Money market funds are absolutely a conservative investment vehicle, but they are still an investment -- SIPC covers you in case Vanguard runs off with your money, but it does nothing to protect the value of the money you have invested. The cash I need in case of an emergency I keep in an FDIC insured high yield savings account (I use Ally & American Express). The yields are comparable, and I found that high yield savings accounts were paying a little better when the Fed interest rate was at 0% and money market accounts were roughly at 0% as well.

You make a really good point; I saw that it dropped below the cost of $1.00 during the 2008 crisis; however, I moved it two days ago in Prime Money Market and I will draw it out and possibly move over the Ally within the next months as I watch interest prices closely.

Health Savings Accounts are only applicable to high deductible health insurance plans, which Tricare is not. So not an option for you. I believe the $29/month you are referring to is your SGLI payment (life insurance).

Correct, sorry about that...I am in the process of adding my new spouse into the Tricare system and I assumed Tricare was listed as such on my LES. Speaking of, what is the general advice/opinion with regard to carrying a 20-30 year Term Policy with an outside company? (I was quoted for $22/month for a policy through Navy Mutual on myself that would carry me out to 59 years old, currently 29 y/o)

As previously mentioned, a large emergency fund is less of a priority for military. Force shaping plays out over months and years -- nobody is going to swing by your office on Friday afternoon and tell you to clear out your desk. That said, align the savings with your life plans to stay or go.

Another good point, I'm looking at moving $10k out of my EF, only after 1.) My Roth TSP is maxed and 2.) My Roth IRA is maxed for 2018 and 2019 (will put all into VLXVX). I will then dump the remainder into my Vanguard Taxable Brokerage Account (VTSAX and VTIAX).

To put on your radar for deployment:
1) You can drop $10k of your cash into the Savings Deposit Program after you've been down range for 30 days. It pays a guaranteed 10%, with the money tied up from when you deposit through your return home + 3 months. Not too shabby.
2) You can contribute up to $56k into trad TSP (DOD matching contributions count against this number) while deployed to a combat zone. In theory, you can make this contribution while still making your regular contributions throughout the year against your individual contribution limit of $19k to get the DOD match, but some folks have had issues with how finance/TSP processes these transactions. Given the tradeoffs, I'd probably lean towards making a massive trad TSP contribution during a deployment (even if it cost me some months of DOD matching) if the alternative is putting that money in a taxable investment account.

I should have taken advantage of this while deployed; however, I was not smart on this whole investing bit yet. However, hopefully for the next one I can take advantage of all of these programs. Thank you so much for the information!

spooky105
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Re: Requesting Guidance - 29 y/o military investor

Post by spooky105 » Mon Jan 14, 2019 12:27 pm

Some more thoughts:

LIFE INSURANCE

First off, good on you for looking at term life insurance and skipping whole life. My life insurance setup:

ME
$400,000 SGLI ($29) -- applies while on active duty
$400,000 AAFMAA ($18.15) -- applies until age 50, then tapers to $0 at age 60
$250,000 USAA ($23.53) -- applies until age 48

SPOUSE
$100,000 SGLI ($5) -- applies while on active duty
$400,000 AAFMAA ($18.15) -- applies until age 50, then tapers to $0 at age 60
$250,000 USAA ($20.20) -- applies until age 56*

To arrive at how much insurance I needed I built a spreadsheet to project my income and my spouse's income out until age 50 (youngest kid's college graduation + 1 year) -- beyond that, we'll have saved up enough/kids are out of the house so life insurance is no longer required. Simply put, beyond that point, the death of either one of us would no longer materially impact the lifestyle of the survivor.

For the projections, my spouse's income is pretty straightforward as she is a teacher. That said, I pad her income by 15% for a few years to account for additional costs I would bear with young kids while working full time (child care, etc.). My income is a little more complicated as I take into account incentive pay & career field bonuses. I also account for benefits my family would receive if I died in the line of duty (Dependency & Indemnity Compensation, Survivor Benefit Program). The annual incomes for each of us (plus/minus bonuses & benefits for my family) are discounted to today's dollars using a rate of 4.5%. I use this as a real rate of return for all of my investment calculations -- it is on the conservative side and corresponds to a nominal or headline rate of return of 6.5-7.5% based on a 2-3% rate for inflation. Using a higher number would reduce the amount of insurance required while a lower number would increase it.

*purchased this policy before I really had a plan...expect I will cancel it when we get into our 40s and the math no longer requires as much coverage.

Final note, diversifying across three providers is admittedly excessive. I did it for the simple reason that death is a worst-case scenario for the family, and I would hate to see that scenario happen in conjunction with a worst case scenario at my insurance provider (resulting in reduced or delayed payment). The diversified sources of coverage costs me a few extra bucks but buys me extra peace of mind.

SPOUSE

I missed this piece if you mentioned it early. Are you funding a Roth IRA for your spouse as well? You can do this whether or not your spouse is employed. For 2019, that's $6k each ($12k total) that can be set aside in IRAs. IRS citation:
I want to set up an IRA for my spouse. How much can I contribute?

If you file a joint return and have taxable compensation, you and your spouse can both contribute to your own separate IRAs.

Your total contributions to both your IRA and your spouse’s IRA may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less. It doesn't matter which spouse earned the income.

Roth IRAs and IRA deductions have other income limits. See IRA Contribution Limits and IRA deduction limits.
If your spouse is employed it is worth your time to research their available retirement account options. They may be able to contribute to a 401(k), 403(b), 457, or have access to a pension. Aside from a pension, the options will be broadly similar to TSP ($19k limit for 2019, traditional or Roth) but there are nuances that you'll need to research depending on the account type.

Example: my wife (teacher) could opt into the state pension system (required 8 years of employment to vest...unlikely with me being active duty) or opt into an investment account. With the investment account, she gets a 3% employer contribution and a 3.3% contribution from her salary into a tax advantaged account (traditional) and she directs how the money is invested (good choice of index funds). After doing some digging, I discovered she could also set up a traditional 403(b) (equivalent to traditional TSP) enabling further contributions up to $19k per year (for 2019). To be fair, it took a lot of research to find a worthwhile investment option from the list of district authorized 403(b) providers as most options had high expenses or were for annuities.

Final note for the spouse if employed, keep tabs on any retirement funds from previous employers and consider rolling them over into appropriate IRAs as your spouse changes jobs or you PCS. This may require homework on your end as the existence of the accounts may not be transparent if they were fully funded by the employer.

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oncorhynchus
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Re: Requesting Guidance - 29 y/o military investor

Post by oncorhynchus » Mon Jan 14, 2019 1:03 pm

Fishing50 wrote:
Sat Jan 12, 2019 7:46 am

I don't believe military members needs a large emergency fund as other because absent severe misconduct, the next paycheck is darn near guaranteed. A couple thousand dollar savings account is enough for a car repair or a roundtrip plane ticket home if something devastating happens.
I would submit the over 42K+ active duty and retired Coast Guard members not receiving regular paychecks at the moment as evidence against the frequently cited opinion that military members and retirees can afford to keep a smaller (if any) emergency fund. If anything, federal gov't shutdowns represent a unique risk to cash flow that military, federal employees, contractors, and federal/military retirees should consider. It's not just a black swan event anymore.

o
-- Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime. --

Fishing50
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Re: Requesting Guidance - 29 y/o military investor

Post by Fishing50 » Tue Jan 15, 2019 1:24 am

oncorhynchus wrote:
Mon Jan 14, 2019 1:03 pm
Fishing50 wrote:
Sat Jan 12, 2019 7:46 am

I don't believe military members needs a large emergency fund as other because absent severe misconduct, the next paycheck is darn near guaranteed. A couple thousand dollar savings account is enough for a car repair or a roundtrip plane ticket home if something devastating happens.
I would submit the over 42K+ active duty and retired Coast Guard members not receiving regular paychecks at the moment as evidence against the frequently cited opinion that military members and retirees can afford to keep a smaller (if any) emergency fund. If anything, federal gov't shutdowns represent a unique risk to cash flow that military, federal employees, contractors, and federal/military retirees should consider. It's not just a black swan event anymore.

o
Navy Federal Credit Union will help: GOVERNMENT SHUTDOWN ASSISTANCE
0% APR Loan During Government Shutdown
https://www.navyfederal.org/about/gover ... 22/2018|||
It's perfectly legal, go ask the IRS, they'll say the same thing. I actually feel stupid telling you this, I'm sure you would've investigated the matter yourself. Andy Dufresne

NMBob
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Re: Requesting Guidance - 29 y/o military investor

Post by NMBob » Tue Jan 15, 2019 1:47 am

Life Insurance for Military:

check with USAA and AAFMAA to see what you could get in a term life insurance product to use instead of half to all of sgli. This is not about cost verse sgli, but being able to keep a decent price renewing term policy or similar, past separation.

I became disabled which forced me to retire from the Army at age 36. I lost sgli leaving service. Civilian companies would quote me huge rates due to my illness. I was left with paying for VGLI, Veterans group life insurance from the government. Well, VGLI is not that much of a deal. VGLI is not near as cheap as any healthy person's policy I could have already had and would have continued if I had not just had sgli. So, to do it again, if you can get some usaa or AAFMAA policy at a pretty good rate you will not have to worry about losing it at separation / retirement or paying high vgli rates if you cannot qualify healthy for a replacement policy.

Just found this at USAA:
"Owning a USAA term life insurance policy guarantees you the option to replace some or all of the SGLI lost as a result of military separation or retirement, even if you are disabled.See note 3"
Last edited by NMBob on Tue Jan 15, 2019 2:12 am, edited 3 times in total.

NMBob
Posts: 40
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Re: Requesting Guidance - 29 y/o military investor

Post by NMBob » Tue Jan 15, 2019 1:59 am

oncorhynchus wrote:
Mon Jan 14, 2019 1:03 pm
Fishing50 wrote:
Sat Jan 12, 2019 7:46 am

I don't believe military members needs a large emergency fund as other because absent severe misconduct, the next paycheck is darn near guaranteed. A couple thousand dollar savings account is enough for a car repair or a roundtrip plane ticket home if something devastating happens.
I would submit the over 42K+ active duty and retired Coast Guard members not receiving regular paychecks at the moment as evidence against the frequently cited opinion that military members and retirees can afford to keep a smaller (if any) emergency fund. If anything, federal gov't shutdowns represent a unique risk to cash flow that military, federal employees, contractors, and federal/military retirees should consider. It's not just a black swan event anymore.

o
Many major institutions dealing with the military just went ahead and credited military accounts that had direct deposit , almost 30 years ago. Currently, Several banks in the state of colorado offering interest free loans to government employees until the pay kicks back in. But yes, some folks at some level , somewhere will be in a hard spot. Government is kind of wacky , so shutting down the government to get things done, may become more and more common, so some wisdom in your thoughts of government folks ensuring they are prepared.

For government employees on furlough, look at the bright side for many since they have announced furloughed employees will be paid. 3 weeks paid vacation , just all paid at the end. I would love to take that. Where do I sign up? Think of all the eventually paid for family time gov't employees just received! If this was announced in advance and offered, I bet less than 10 percent would turn down the free vacation.

spooky105
Posts: 106
Joined: Fri Aug 14, 2015 11:38 pm

Re: Requesting Guidance - 29 y/o military investor

Post by spooky105 » Wed Jan 16, 2019 8:15 am

NMBob wrote:
Tue Jan 15, 2019 1:47 am
This is not about cost verse sgli, but being able to keep a decent price renewing term policy or similar, past separation.

I became disabled which forced me to retire from the Army at age 36. I lost sgli leaving service. Civilian companies would quote me huge rates due to my illness. I was left with paying for VGLI, Veterans group life insurance from the government. Well, VGLI is not that much of a deal. VGLI is not near as cheap as any healthy person's policy I could have already had and would have continued if I had not just had sgli. So, to do it again, if you can get some usaa or AAFMAA policy at a pretty good rate you will not have to worry about losing it at separation / retirement or paying high vgli rates if you cannot qualify healthy for a replacement policy.
This is a great point I forgot to mention in my earlier post about life insurance

NMBob
Posts: 40
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Re: Requesting Guidance - 29 y/o military investor

Post by NMBob » Thu Jan 17, 2019 3:50 am

shorter term money, Do need to keep an eye on whatever the promotion rate to major will be. It may be higher than it was 20 years ago. Also, as has been posted ..rif's. We had one of the 3 majors in our battalion get rif'd less than 2 years after the first gulf war. Always found it interesting to watch the Army close down units it had just used in the first gulf war. Although, an army draw down had just started right before the 100 hour war buildup, and was continued after. So, be prepared for anything.

old article - https://www.armytimes.com/news/your-arm ... to-normal/

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