Pre-Military Seeking Investment Planning

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Dantheman221
Posts: 16
Joined: Sat Jun 01, 2019 6:53 pm

Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sat Jun 01, 2019 7:35 pm

Hey bogleheads,
Just looking for some additional information and figuring out if my financial plan is sound for the near future. I've been doing a lot of research on a lot of different strategies and sectors which has got me a bit confused and I'd love some clarification before I head out for boot in 4 days.

I'm currently 23 years old, no debt, only around $1000 in 2 savings accounts, 1 on wealthfront earning 2.51% and one with Marcus at 2.25%. Since the military is considered a stable job, I don't see much of a need in having more than $10k in a savings account and even then, I'm thinking about creating a CD ladder with half of that at various rates up to 3.15%. I'm trying to build around $400k to start my own business for the short term, maybe within the next 8-10 years. I have really low spending habits so I intend on having around $500-1000 left over each month post retirement account contributions so that would seem somewhat realistic but I'm here to get some advice so I can solidify my financial plan while I still can and thanks for the help and sorry for all the questions and random thoughts.

I plan on converting to a Roth TSP and attempting to max it out before my Roth IRA. I'm not sure if that's a sound strategy or not. Should I instead try to max out my IRA and keep the TSP for the max matching contributions? For the Roth TSP, I'm looking a 80/10/10 in C S I funds for the near future. I also had a question about which broker or service to invest with for the IRA. I heard that Vanguard tends to be the go-to but, if pseudo robo advisors like M1 finance offer no fees except the sec minimums, wouldn't that be the better option despite the opening bonuses? Or maybe opening the accounts for bonuses and transferring over to M1? In addition, what should I be using my Roth IRA for? Least tax efficient investments? REITs?

I also am looking to start a taxable and split 80/20 stocks/bonds but I'm a bit more aggressive so maybe 85/15 since I'm still really young and have no liabilities, I'm not afraid of losing a bit in stocks. I've heard so much jargon about private investment loans like lending club and fundrise or hedgefund-like investing Titan but, they all seem like a fad for millennials that don't understand publicly traded REITs and such. Still, I'm just generally confused about the market. Still, I feel like investing into Tech, Pharma and financial is a must. Should I go through a brokerage or stick with M1 or something similar for the low fees for my taxable? Wealthfront has the tax loss harvesting but does that really make that big of a difference for someone making less than 100k/year? I suppose every penny counts, however. Also, would subscribing to Morningstar or Motley Fool be a good idea for their recommendations or would the publicly available information be enough? Thanks again for reading and helping out.

Wings5
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Re: Pre-Military Seeking Investment Planning

Post by Wings5 » Sat Jun 01, 2019 8:40 pm

What will you be doing in the military? That can make a big difference in goals and planning. Deployments, frequent TDYs; those buckets add up.

Topic Author
Dantheman221
Posts: 16
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sat Jun 01, 2019 8:48 pm

Wings5 wrote:
Sat Jun 01, 2019 8:40 pm
What will you be doing in the military? That can make a big difference in goals and planning. Deployments, frequent TDYs; those buckets add up.
Surface Warfare in the Navy. Ship deployments overseas. Auto advancement to E-3 maybe E-4 after schools which gets me OHA, split rent multiple ways between other squids for a single apartment and pocket the rest so I expect to get much more cash out. I don't mind being overseas for a while and actually prefer it but, I will try to find a conus duty station after 10 years to focus more on my business or go into reserves for a while. After I get that sorted, looking to spend another 10 years in for the pension and retire and go full time into my business.
Last edited by Dantheman221 on Sat Jun 01, 2019 8:54 pm, edited 1 time in total.

Wings5
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Re: Pre-Military Seeking Investment Planning

Post by Wings5 » Sat Jun 01, 2019 8:53 pm

Look up Nords on the forum. Retired Navy O-5. He's got TONS of great advice.

Thanks for signing up! It's not hard to sack away a ton in the military if you can avoid the peer pressure and get by on the little that you'll find you need.

Topic Author
Dantheman221
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sat Jun 01, 2019 8:56 pm

Wings5 wrote:
Sat Jun 01, 2019 8:53 pm
Look up Nords on the forum. Retired Navy O-5. He's got TONS of great advice.

Thanks for signing up! It's not hard to sack away a ton in the military if you can avoid the peer pressure and get by on the little that you'll find you need.
Thanks for the advice and yeah, I don't care much for peer pressure besides, honor, courage and commitment haha. The incentives and bonuses are something I plan to take advantage of heavily. Special pays and housing allowance are a big part of maximizing my income and investing strategy.

Edit: Oh wow, I didn't realize he was the author of that one book I started reading. That's quite the coincidence!

printer86
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Re: Pre-Military Seeking Investment Planning

Post by printer86 » Sat Jun 01, 2019 9:07 pm

Military personnel, with their steady income, are prime targets for companies offering easy looking loans or purchase plan deals. I know you said that you don't have any debt right now, so please be extra vigilant as you go thru your career. Being loaded down with debt can fell like a prison sentence.

Best of luck with your career, and thanks for doing what you do.

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mokaThought
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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sat Jun 01, 2019 9:25 pm

Hi Dantheman221. I'm a former Surface Warfare Officer myself (2007–2014, O-3, mostly WESTPAC). Congrats on entering!

* Definitely set up the Roth TSP. It sounds like you've done your homework on that one. [[Unless something has changed since I was in, there are no matching contributions. 👈🏼 Wrong! See correction later in this thread.]] TSP has a much higher contribution limit and is much easier to "forget," though it's also possible to set up an allotment that goes to your Roth IRA. Personally, I had a high-yield savings account to which I had MyPay send a certain amount each month. I then set Vanguard to deduct the monthly IRA contribution from that account. Automation is already a great thing for land-lubbers, but it's even more important when you're underway since you won't always have access to a brokerage website. If your ship's IT guys are strict, they might even block access to the brokerage websites altogether, and you don't want to have to manage your investment accounts from an Internet cafe in Thailand.

* And since automation is important, you may want to stick to traditional mutual funds in the Roth IRA rather than ETFs. What complicates the setup with Vanguard there is the typical minimum investment of $3,000. If you deploy before you hit $3,000 to invest, you might start with STAR Fund ($1,000), let that grow over deployment, and then move into Total Stock Market, etc. when you return.

* Again with the automation: Consider short-term bond mutual funds on the taxable side if you're going to be on deployment and don't want to manage a CD ladder at sea. And don't forget that you need some cash in an actual bank or credit union for buying nice things on port visits. Plenty of shipmates had USAA, but I was quite satisfied with my access to Navy Federal in WESTPAC. They're on all of the Navy bases in Japan, and they even set up a physical shop in Hong Kong for our port visit there.

* Acquire a credit card with no international transaction fee. While I was still in, all CapitalOne cards met this requirement.

* "Navy Cash" cards are garbage. Use them for purchases onboard (soda, gee dunk, soap, shampoo, etc.), but don't bother with the allotment for "liberty money" that they try to push. It's quite seedy. That's what banks and credit unions are for.

* You mentioned OHA. Are you already expecting to be permanently deployed overseas, or did you mean BAH? The difference is important.

* Avoid FirstCommand Financial Planning like the plague.
Last edited by mokaThought on Sun Jun 02, 2019 1:48 am, edited 1 time in total.
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

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mokaThought
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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sat Jun 01, 2019 9:27 pm

printer86 wrote:
Sat Jun 01, 2019 9:07 pm
Military personnel, with their steady income, are prime targets for companies offering easy looking loans or purchase plan deals. I know you said that you don't have any debt right now, so please be extra vigilant as you go thru your career. Being loaded down with debt can fell like a prison sentence.

Best of luck with your career, and thanks for doing what you do.
⬆️Indeed. Not only is there steady income, but the military is the only employer that will actually punish its employees for not paying their debts!
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

Topic Author
Dantheman221
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sat Jun 01, 2019 9:29 pm

printer86 wrote:
Sat Jun 01, 2019 9:07 pm
Military personnel, with their steady income, are prime targets for companies offering easy looking loans or purchase plan deals. I know you said that you don't have any debt right now, so please be extra vigilant as you go thru your career. Being loaded down with debt can fell like a prison sentence.

Best of luck with your career, and thanks for doing what you do.
I've seen my fair share of people with debt, military or not and what it does to them and I don't want to fall down that rabbit hole. I intend on building up my income and savings and never taking a loan out in the first place and using credit cards for the benefits only, not the aprs.

Topic Author
Dantheman221
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sat Jun 01, 2019 9:36 pm

mokaThought wrote:
Sat Jun 01, 2019 9:25 pm
Hi Dantheman221. I'm a former Surface Warfare Officer myself (2007–2014, O-3, mostly WESTPAC). Congrats on entering!

* Definitely set up the Roth TSP. It sounds like you've done your homework on that one. Unless something has changed since I was in, there are no matching contributions. TSP has a much higher contribution limit and is much easier to "forget," though it's also possible to set up an allotment that goes to your Roth IRA. Personally, I had a high-yield savings account to which I had MyPay send a certain amount each month. I then set Vanguard to deduct the monthly IRA contribution from that account. Automation is already a great thing for land-lubbers, but it's even more important when you're underway since you won't always have access to a brokerage website. If your ship's IT guys are strict, they might even block access to the brokerage websites altogether, and you don't want to have to manage your investment accounts from an Internet cafe in Thailand.

* And since automation is important, you may want to stick to traditional mutual funds in the Roth IRA rather than ETFs. What complicates the setup with Vanguard there is the typical minimum investment of $3,000. If you deploy before you hit $3,000 to invest, you might start with STAR Fund ($1,000), let that grow over deployment, and then move into Total Stock Market, etc. when you return.

* Again with the automation: Consider short-term bond mutual funds on the taxable side if you're going to be on deployment and don't want to manage a CD ladder at sea. And don't forget that you need some cash in an actual bank or credit union for buying nice things on port visits. Plenty of shipmates had USAA, but I was quite satisfied with my access to Navy Federal in WESTPAC. They're on all of the Navy bases in Japan, and they even set up a physical shop in Hong Kong for our port visit there.

* Acquire a credit card with no international transaction fee. While I was still in, all CapitalOne cards met this requirement.

* "Navy Cash" cards are garbage. Use them for purchases onboard (soda, gee dunk, soap, shampoo, etc.), but don't bother with the allotment for "liberty money" that they try to push. It's quite seedy. That's what banks and credit unions are for.

* You mentioned OHA. Are you already expecting to be permanently deployed overseas, or did you mean BAH? The difference is important.

* Avoid FirstCommand Financial Planning like the plague.
Oh wow, that's a lot of advice, thanks for the help. I have an international phone plan with a built in vpn so no Thailand internet cafes for me. I'm pretty sure the agency matches your contributions from paycheck up to 5% unless you're in the CSRS, I might be wrong on that, though. I plan on opening a few credit cards strategically with the scra benefits. The Chase Sapphire Reserve and the Amex Platinum after the 5/24 chase limits. I already have a Navy Fed account and I prefer them over USAA, despite what service members say. Also, I plan on using the active duty checking to get my pay early but have automatic transfers to savings, IRA and taxable accounts. Yeah, I'm expecting permanent overseas for now. Either gonna be AECF ET/FC or CTI depending on when I get clearance so that seems like an overseas path to me. What's the difference between OHA and BAH, though, besides one being conus and one being oconus?

feehater
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Re: Pre-Military Seeking Investment Planning

Post by feehater » Sat Jun 01, 2019 10:13 pm

mokaThought wrote:
Sat Jun 01, 2019 9:25 pm
Unless something has changed since I was in, there are no matching contributions.
OP will be forced to enter under the Blended Retirement System, so s/he will have a small match, but in exchange, the defined benefit pension will only be 40% instead of 50%. Contributing up to the match should obviously be a given.

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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sat Jun 01, 2019 10:50 pm

Dantheman221 wrote:
Sat Jun 01, 2019 9:36 pm
Either gonna be AECF ET/FC or CTI depending on when I get clearance so that seems like an overseas path to me.
Ooo, we have a nerd here. :D
What's the difference between OHA and BAH, though, besides one being conus and one being oconus?
OHA = Overseas. You get the exact rent amount (converted to dollars) or the maximum OHA for your paygrade, whichever is less, and a utilities allowance that almost certainly exceeds what you need. You pocket the rest.

BAH = Domestic. You rent a place, regardless of the rent amount, and you get the BAH for your paygrade and zip code. Rent a place cheaper than BAH, and you pocket the difference.

That said, don't expect to be able to live off-base with OHA as an E-4 or potentially even higher. At least in my area of Japan, they really wanted to reduce the number of Sailors living off base because of the cost. The barracks still beat having to live on the ship while in port.
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

krafty81
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Re: Pre-Military Seeking Investment Planning

Post by krafty81 » Sat Jun 01, 2019 11:25 pm

Remember as AD you can get any credit card with annual fee waived. If you qualify, AMEX Plat is a good choice but pay it off monthly.

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mokaThought
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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sat Jun 01, 2019 11:31 pm

krafty81 wrote:
Sat Jun 01, 2019 11:25 pm
Remember as AD you can get any credit card with annual fee waived. If you qualify, AMEX Plat is a good choice but pay it off monthly.
I didn't know that. Good stuff! Make sure you have a Visa card for overseas compatibility, though.
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

spooky105
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Re: Pre-Military Seeking Investment Planning

Post by spooky105 » Sun Jun 02, 2019 12:05 am

I'll try to cover quite a bit of ground here for you. Tried to minimize the re-attacks from other posters, but some are inevitable...

BLENDED RETIREMENT SYSTEM

Since you're entering the service after 1 Jan, 2018 you will be under the blended retirement system. What this means to you at this stage:

1) 60 days after entry, the service will begin contributing 1% of your basic pay to a Traditional TSP account. You get this regardless of whether you make any contributions and it will always be Traditional (never Roth). This contribution does not count against your $19k contribution limit (2019).
2) After completing 2 years, you will be eligible to receive matching contributions from the service. To max this out, you need to contribute 5% of your basic pay (can be Roth or Traditional). In return, you will receive another 4% of your basic pay contributed to your Traditional TSP account. Again, the matching contribution from the service does not count against your $19k limit (2019). But of course your 5% contribution does.
3) Additionally, after completing 2 years of service you will be vested (meaning the money is yours when you leave) in all service contributions (that's the 1% that starts after the 60 day mark + 4% match that starts after the 2 year mark). You are always vested in the money you contribute (and any associated gains).

Get smart on all this here: https://militarypay.defense.gov/blendedretirement/


WHERE TO PUT YOUR MONEY

Make all of your contributions to Roth accounts. You income tax rate is likely the lowest it will ever be in your life (especially if you sprinkle some deployments in there) so pay the bill now, let the money compound tax free, and then come out tax free in retirement. You can also withdrawn contributions to a Roth IRA for any reason, at any time, without tax consequences. But restrict this to real emergencies -- you can't put previous year's money back in after you take it out.

Don't touch taxable accounts until you're maxing Roth TSP ($19k) and your Roth IRA ($6k).

When it comes to filling them up, there are two Courses Of Action (COAs):
1) Fill up your Roth TSP first since it is harder to touch (less temptation to withdrawn money down the road). Then fill up your Roth IRA.
2) Contribute min to Roth TSP to get match then fill up Roth IRA first -- the contributions double as an emergency fund since they can always be withdrawn. After Roth IRA is full then go back to filling up Roth TSP.

Which COA you pursue really comes down to your personality. Can you set up your retirement savings in a Roth IRA knowing you can pull the money back out and successfully fight that temptation? What about when all of your peers (who probably aren't saving anything) are constantly going out / buying new toys?

I recommend COA 1, but know thyself and go from there.


HOW TO INVEST

Invest in a Lifecycle fund (TSP) or Vanguard Target Retirement fund (IRA). For Lifecycle, you'll want to get into the 2060 fund when it comes out next year. For now, go with 2050. These funds will put you roughly 90/10, with the 2050 fund being a bit more conservative than that, but only a temporary vehicle.

As to the why...the portfolios are sound (developed by experts, etc.) and will be automatically re-balanced to maintain the asset allocation and retirement glidepath. Can you do better? Possibly. But you'll only know if another asset allocation was superior after the fact. Also, going with a different allocation will require more work on your end (periodic re-balancing) and open up the temptation to mess around too much (chasing returns, changing an under-performing allocation at the worst time, etc.). These will give you average returns with a reasonable risk/reward profile over your lifespan. This is a good thing.

Keep it simple. Keep it hands-off. Live your life.


WHERE TO SET UP YOUR IRA

Vanguard.

Simple explanation: the shareholders own the funds and the funds own the company. There's no extra layer at the top that needs to get paid (private owners for Fidelity, public shareholders for others, etc.). It gives Vanguard the incentive to cut costs and put more money back in your pocket as the funds grow and technology develops. Other companies will advertise some cheaper options, but these are isolated examples highlighted for marketing purposes. Their hope is to get you in the door and cross sell you something else down the road.

Investment minimums are generally $1,000 for mutual funds in IRAs with a $50 / month (minimum) automatic contribution requirement.

Whenever you set up an IRA ensure that the contributions from your checking account are automatic and the investing is automatic. Again, keep it simple. Keep it hands-off. Live your life.


SOME PERSEPCTIVE

The sooner you build a savings and investment system that is automatic, the sooner you will be successful. If you have to manually put the money into a savings or investment account from your checking account it will be spent before it is ever saved. If you have to manually purchase your investments you will constantly second-guess your decisions and get sucked in to the "hot" trends (precious metals, bitcoin, etc.). Save your money before you ever see it ("pay yourself first") and keep the investment portfolio & execution simple. A well executed system is boring -- boring in execution & boring in investments. This is a good thing.

Understand that anyone at a peer level talking about how they made a killing buying X or selling Y is only telling you about the wins, or they're bad at math. Or both. You'll see this all the time with housing. Folks talk about the difference between the selling price and their purchase price as if the difference is pure profit. The reality is they paid closing costs out of pocket when the house was bought, agent fees when the house was sold, and thousands of dollars in maintenance & tax in between. The situation is way more complicated than they make it out to be and that "killing" is more likely to be more of a break-even or a reasonable/modest gain. Similar story with whatever the hot stock or fund is. Only here people always talk about the wins and never their more frequent losses. They may not even know how badly they've come out because they don't effectively track their gains/losses.

Understand that anyone cold calling or pitching you on a financial product or "solution" is a salesman focused on earning a commission. Doesn't matter what credentials they hold, what fancy letters come after their name, or even how long they served in the military before their present job. They're out to put food on their table. And you'll be the one paying for it. People who are paid to put your interests first have to be sought out -- they don't cold call on the off chance you need their services.

Understand that at this stage of the game your savings rate is more important that your rate of return to building overall wealth. Focus your energy on how to grow your monthly savings through job performance/promotion, cost cutting, and fighting lifestyle inflation. Recommend you save as much as possible now, then increase your savings by 50% of every pay raise you receive. This serves to limit lifestyle inflation and makes increasing your savings rate easy.

Understand that the most successful investors (Buffet, Bridgewater, Renaissance, etc.) have annual rates of return in the teens to low 20's over decades. That's what "winning" looks like. And it is extremely rare. Anything better is just luck/noise (and typically very short term). Average is somewhere around 8% per year. Shoot for average through index funds and you'll beat out everyone else chasing hot trends, panicking when the market drops, and so on. Come to think of it, you'll be above average.


FINAL THOUGHTS

Fill up your Roth TSP & IRA before you touch taxable investments. Once you've done that, you can worry about robo-advisors, lending club, REITS, etc.

Don't touch whole life insurance.

Don't touch anything from First Command.


Hope it helps. Feel free to hit me up direct.

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BL
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Re: Pre-Military Seeking Investment Planning

Post by BL » Sun Jun 02, 2019 12:45 am

Another fund at Vanguard besides the Star fund that you can start for $1000 is the excellent Target Date retirement series. A far-away date has only 10% bonds and I think the 2020 has about 50% bonds. They stay at 10% quite a while. Good idea to do a Roth IRA and perhaps start with a Roth TSP. There may be some special deals for saving extra cash while overseas; keep an eye out for that.

Watch out for ex-military and civilian salespeople that are targeting military folks: investment, insurance, multi-level marketing plans when you are near leaving the service, etc. "Friends" and relatives are best avoided when doing this kind of business. Vanguard folks don't work on commission so I would trust them, but be cautious almost anywhere else, especially if you are hoping for some "expert" advice. Don't pay anywhere else for "advice" or Expense Ratios (ER) higher than necessary.

Pick up a Boglehead's Guide to Investing to get the basics, or read through the Wiki here starting with "Getting Started". There are lots of subjects and some videos as well. A good review and good advice for new investors is If You Can by Dr William Bernstein, just a 16-page pdf:
https://www.etf.com/docs/IfYouCan.pdf

Lots of good advice has been given above.

SteveJones
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Re: Pre-Military Seeking Investment Planning

Post by SteveJones » Sun Jun 02, 2019 5:27 am

18 yrs in the Navy here.
At 23 yrs old do you already have a degree? Or is this one of those 'last chance to do something with my life' type things? I was the latter when I was 21 so I get it. If you have a degree I'd strongly consider a commission and not an enlistment.

As a junior enlisted sailor don't think you can count on BAH as part of your compensation package. It has to be approved. You may live in the barrack for the first few years or even on the ship if you get out there. While in the Barracks you can expect $700-$800 checks twice a month. Not bad considering you don't pay for housing or food, but that my not be what is in your head. The worst thing you could do spend one of those checks per month on a car and insurance!

Open the TSP ASAP and start investing heavily in the C, S, and I fund. I'd do 70% C, 20% S, and 10% I. There are other options, but this is the most convenient and TSP is designed for military allotments. You won't make enough money to max out TSP let alone open an IRA. I'd focus on the TSP which will provide a good return with the correct breakdown and it is all done for your in boot camp. You have enough to worry about as you go through your initial training and quals on the ship.

$10,000 in a savings account is fine especially since you will be renting.

Focus on learning how to be a lethal part of the force first then deviate from this or a similar simple plan.

Topic Author
Dantheman221
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 6:09 am

mokaThought wrote:
Sat Jun 01, 2019 10:50 pm
Dantheman221 wrote:
Sat Jun 01, 2019 9:36 pm
Either gonna be AECF ET/FC or CTI depending on when I get clearance so that seems like an overseas path to me.
Ooo, we have a nerd here. :D
What's the difference between OHA and BAH, though, besides one being conus and one being oconus?
OHA = Overseas. You get the exact rent amount (converted to dollars) or the maximum OHA for your paygrade, whichever is less, and a utilities allowance that almost certainly exceeds what you need. You pocket the rest.

BAH = Domestic. You rent a place, regardless of the rent amount, and you get the BAH for your paygrade and zip code. Rent a place cheaper than BAH, and you pocket the difference.

That said, don't expect to be able to live off-base with OHA as an E-4 or potentially even higher. At least in my area of Japan, they really wanted to reduce the number of Sailors living off base because of the cost. The barracks still beat having to live on the ship while in port.
Was that Yokosuka or Sasebo? I checked the advancement quotas for CTI and FC and it was around 45% last year. Higher this year for CTI, I'm sure. Doesn't that also influence if you get OHA since they wanna keep you in the force and make you happy? BAH definitely seems more tempting and domestic station wouldn be a nice change of pace to relocate to an area closer to where I believe I'd like to start the business and live.
Last edited by Dantheman221 on Sun Jun 02, 2019 6:27 am, edited 1 time in total.

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Dantheman221
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 6:24 am

spooky105 wrote:
Sun Jun 02, 2019 12:05 am
I'll try to cover quite a bit of ground here for you. Tried to minimize the re-attacks from other posters, but some are inevitable...

BLENDED RETIREMENT SYSTEM

Since you're entering the service after 1 Jan, 2018 you will be under the blended retirement system. What this means to you at this stage:

1) 60 days after entry, the service will begin contributing 1% of your basic pay to a Traditional TSP account. You get this regardless of whether you make any contributions and it will always be Traditional (never Roth). This contribution does not count against your $19k contribution limit (2019).
2) After completing 2 years, you will be eligible to receive matching contributions from the service. To max this out, you need to contribute 5% of your basic pay (can be Roth or Traditional). In return, you will receive another 4% of your basic pay contributed to your Traditional TSP account. Again, the matching contribution from the service does not count against your $19k limit (2019). But of course your 5% contribution does.
3) Additionally, after completing 2 years of service you will be vested (meaning the money is yours when you leave) in all service contributions (that's the 1% that starts after the 60 day mark + 4% match that starts after the 2 year mark). You are always vested in the money you contribute (and any associated gains).

Get smart on all this here: https://militarypay.defense.gov/blendedretirement/


WHERE TO PUT YOUR MONEY

Make all of your contributions to Roth accounts. You income tax rate is likely the lowest it will ever be in your life (especially if you sprinkle some deployments in there) so pay the bill now, let the money compound tax free, and then come out tax free in retirement. You can also withdrawn contributions to a Roth IRA for any reason, at any time, without tax consequences. But restrict this to real emergencies -- you can't put previous year's money back in after you take it out.

Don't touch taxable accounts until you're maxing Roth TSP ($19k) and your Roth IRA ($6k).

When it comes to filling them up, there are two Courses Of Action (COAs):
1) Fill up your Roth TSP first since it is harder to touch (less temptation to withdrawn money down the road). Then fill up your Roth IRA.
2) Contribute min to Roth TSP to get match then fill up Roth IRA first -- the contributions double as an emergency fund since they can always be withdrawn. After Roth IRA is full then go back to filling up Roth TSP.

Which COA you pursue really comes down to your personality. Can you set up your retirement savings in a Roth IRA knowing you can pull the money back out and successfully fight that temptation? What about when all of your peers (who probably aren't saving anything) are constantly going out / buying new toys?

I recommend COA 1, but know thyself and go from there.


HOW TO INVEST

Invest in a Lifecycle fund (TSP) or Vanguard Target Retirement fund (IRA). For Lifecycle, you'll want to get into the 2060 fund when it comes out next year. For now, go with 2050. These funds will put you roughly 90/10, with the 2050 fund being a bit more conservative than that, but only a temporary vehicle.

As to the why...the portfolios are sound (developed by experts, etc.) and will be automatically re-balanced to maintain the asset allocation and retirement glidepath. Can you do better? Possibly. But you'll only know if another asset allocation was superior after the fact. Also, going with a different allocation will require more work on your end (periodic re-balancing) and open up the temptation to mess around too much (chasing returns, changing an under-performing allocation at the worst time, etc.). These will give you average returns with a reasonable risk/reward profile over your lifespan. This is a good thing.

Keep it simple. Keep it hands-off. Live your life.


WHERE TO SET UP YOUR IRA

Vanguard.

Simple explanation: the shareholders own the funds and the funds own the company. There's no extra layer at the top that needs to get paid (private owners for Fidelity, public shareholders for others, etc.). It gives Vanguard the incentive to cut costs and put more money back in your pocket as the funds grow and technology develops. Other companies will advertise some cheaper options, but these are isolated examples highlighted for marketing purposes. Their hope is to get you in the door and cross sell you something else down the road.

Investment minimums are generally $1,000 for mutual funds in IRAs with a $50 / month (minimum) automatic contribution requirement.

Whenever you set up an IRA ensure that the contributions from your checking account are automatic and the investing is automatic. Again, keep it simple. Keep it hands-off. Live your life.


SOME PERSEPCTIVE

The sooner you build a savings and investment system that is automatic, the sooner you will be successful. If you have to manually put the money into a savings or investment account from your checking account it will be spent before it is ever saved. If you have to manually purchase your investments you will constantly second-guess your decisions and get sucked in to the "hot" trends (precious metals, bitcoin, etc.). Save your money before you ever see it ("pay yourself first") and keep the investment portfolio & execution simple. A well executed system is boring -- boring in execution & boring in investments. This is a good thing.

Understand that anyone at a peer level talking about how they made a killing buying X or selling Y is only telling you about the wins, or they're bad at math. Or both. You'll see this all the time with housing. Folks talk about the difference between the selling price and their purchase price as if the difference is pure profit. The reality is they paid closing costs out of pocket when the house was bought, agent fees when the house was sold, and thousands of dollars in maintenance & tax in between. The situation is way more complicated than they make it out to be and that "killing" is more likely to be more of a break-even or a reasonable/modest gain. Similar story with whatever the hot stock or fund is. Only here people always talk about the wins and never their more frequent losses. They may not even know how badly they've come out because they don't effectively track their gains/losses.

Understand that anyone cold calling or pitching you on a financial product or "solution" is a salesman focused on earning a commission. Doesn't matter what credentials they hold, what fancy letters come after their name, or even how long they served in the military before their present job. They're out to put food on their table. And you'll be the one paying for it. People who are paid to put your interests first have to be sought out -- they don't cold call on the off chance you need their services.

Understand that at this stage of the game your savings rate is more important that your rate of return to building overall wealth. Focus your energy on how to grow your monthly savings through job performance/promotion, cost cutting, and fighting lifestyle inflation. Recommend you save as much as possible now, then increase your savings by 50% of every pay raise you receive. This serves to limit lifestyle inflation and makes increasing your savings rate easy.

Understand that the most successful investors (Buffet, Bridgewater, Renaissance, etc.) have annual rates of return in the teens to low 20's over decades. That's what "winning" looks like. And it is extremely rare. Anything better is just luck/noise (and typically very short term). Average is somewhere around 8% per year. Shoot for average through index funds and you'll beat out everyone else chasing hot trends, panicking when the market drops, and so on. Come to think of it, you'll be above average.


FINAL THOUGHTS

Fill up your Roth TSP & IRA before you touch taxable investments. Once you've done that, you can worry about robo-advisors, lending club, REITS, etc.

Don't touch whole life insurance.

Don't touch anything from First Command.


Hope it helps. Feel free to hit me up direct.
Thanks for the info. Lots of things I knew but needed reassurance on. Is it possible to take the govt matching and convert it to Roth afterwards or is it always traditional until I take the money out? Also, since the government won't really match until after 2 years of service, is there a point in contributing to maxing it out at the years prior to the matching? Wouldn't a better option be to max out IRA, put some in a taxable/savings but contribute to the TSP without maxing, especially since I'm trying to save up maybe $500k in the next 10 years that I can take out without penalty and not worry about taking it from Roth IRA? Also, does it count years of service since I entered the Navy after DEP or years of active duty service?

And, historically, has the target date really worked out or is it mostly recommended for the hand off approach? What would the margin be for self controlled vs retirement date? I don't plan on beating the market but, I tend do think I understand at least some of the market, especially tech to know what's going to go up or down and what to buy when for value investing.

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mokaThought
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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sun Jun 02, 2019 6:51 am

Dantheman221 wrote:
Sun Jun 02, 2019 6:09 am
Was that Yokosuka or Sasebo? I checked the advancement quotas for CTI and FC and it was around 45% last year. Higher this year for CTI, I'm sure. Doesn't that also influence if you get OHA since they wanna keep you in the force and make you happy? BAH definitely seems more tempting and domestic station wouldn be a nice change of pace to relocate to an area closer to where I believe I'd like to start the business and live.
Both Yokosuka and Sasebo, actually. :D

Rating alone doesn't affect OHA, though if it's a rating in which you advance in rate quickly, that will clearly affect it. Rating very much affects reenlistment bonuses.
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

Topic Author
Dantheman221
Posts: 16
Joined: Sat Jun 01, 2019 6:53 pm

Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 7:16 am

mokaThought wrote:
Sun Jun 02, 2019 6:51 am
Dantheman221 wrote:
Sun Jun 02, 2019 6:09 am
Was that Yokosuka or Sasebo? I checked the advancement quotas for CTI and FC and it was around 45% last year. Higher this year for CTI, I'm sure. Doesn't that also influence if you get OHA since they wanna keep you in the force and make you happy? BAH definitely seems more tempting and domestic station wouldn be a nice change of pace to relocate to an area closer to where I believe I'd like to start the business and live.
Both Yokosuka and Sasebo, actually. :D

Rating alone doesn't affect OHA, though if it's a rating in which you advance in rate quickly, that will clearly affect it. Rating very much affects reenlistment bonuses.
For sure. I'm already getting a $10k signing bonus which completely covers savings account after A school. Reenlistment bonuses are around $75k for Zone A, I believe. Probably changed now.

Also, do you agree that you'd rather be stationed at Yokosuka? Most people I ask tend to think that. Closer to civilization and big cities and all.

Topic Author
Dantheman221
Posts: 16
Joined: Sat Jun 01, 2019 6:53 pm

Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 8:01 am

SteveJones wrote:
Sun Jun 02, 2019 5:27 am
18 yrs in the Navy here.
At 23 yrs old do you already have a degree? Or is this one of those 'last chance to do something with my life' type things? I was the latter when I was 21 so I get it. If you have a degree I'd strongly consider a commission and not an enlistment.

As a junior enlisted sailor don't think you can count on BAH as part of your compensation package. It has to be approved. You may live in the barrack for the first few years or even on the ship if you get out there. While in the Barracks you can expect $700-$800 checks twice a month. Not bad considering you don't pay for housing or food, but that my not be what is in your head. The worst thing you could do spend one of those checks per month on a car and insurance!

Open the TSP ASAP and start investing heavily in the C, S, and I fund. I'd do 70% C, 20% S, and 10% I. There are other options, but this is the most convenient and TSP is designed for military allotments. You won't make enough money to max out TSP let alone open an IRA. I'd focus on the TSP which will provide a good return with the correct breakdown and it is all done for your in boot camp. You have enough to worry about as you go through your initial training and quals on the ship.

$10,000 in a savings account is fine especially since you will be renting.

Focus on learning how to be a lethal part of the force first then deviate from this or a similar simple plan.
Never got to finish, grades got bad but enough for me to get the credit bonus for enlisting. Would've had to take some loans out and I still wasn't sure what I really felt passionate about, still don't. I would've went commissioned if I could.

How often do rates above E-5 get approved for BAH? I expect to be getting pretty low base pay and I accounted for the worst of circumstances but just like boot, whatever you tend to think or prepare for, it's much worse in reality. I don't plan on getting a car anytime soon and only bills and insurance would be for the phone, internet and renters insurance since barracks are notorious for theft. That's around $100/month depending on zip code. I should be able to max out TSP and IRA after E-5 and 4 years of service, especially if I'm getting foreign language pay and BAH/OHA. I don't expect to max it out the first few years but good work ethics and being as likeable as an MPO in boot or a CS is a good way to get there, especially around command.

snowman
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Re: Pre-Military Seeking Investment Planning

Post by snowman » Sun Jun 02, 2019 9:52 am

OP,

First, let me say I am not military personnel, so I cannot comment on some specific questions of yours. However, my son just commissioned with AF last month and will start AD next month, so we have done similar financial planning over the last few months. With that said, I think you have a great plan, and you got some excellent advice from other posters already. My advice will be more “around the edges” as you are 90% there already.

1. Max out Roth TSP. That is the single best thing you can do now. I do not know your pay level, but if you can afford it, do it.

2. Open taxable, traditional IRA, and Roth IRA accounts at Vanguard. Put any savings after maxing out Roth TSP into Vanguard taxable account, and let it earn interest in their excellent MMF. Then, next spring when you do your taxes for 2019, you decide whether to invest it in traditional or Roth IRA. The reason to even consider traditional IRA for 2019 tax year is that it may decrease your AGI to the point where you may qualify for saver’s credit.

3. Starting in 2020, make a plan to max out both Roth TSP and Roth IRA.

4. As your pay increases, and you pocket BAH (if possible), put any extra money into Vanguard taxable account.

5. Open CMA account at Fidelity. That will essentially be your fee-free high yield checking account where DD goes, and link it to your Vanguard investment account. Not only will you earn interest, but you will get no-fee ATM card around the world for cash withdrawals.

Now, as far as what investments to buy in which account, opinions will vary, so just make sure whatever you choose you are comfortable sticking with for the long term. Lifecycle funds are good, but personally I am not a fan of bonds at such an early age, and I like your plan of buying C, S and I funds better. Again, you cannot go wrong either way, so just pick one and stick with it!

As others pointed out, automation is the key. If you decide to auto invest in MFs at Vanguard Roth IRA, and you don’t yet have $3K to buy MFs, open Roth at Fidelity as well, and invest in their zero funds as they have no minimums and no expense fees.

Keep your EF at a minimum, maybe $5K, probably in Vanguard taxable account in prime MMF. Unless you screw up really bad, you have guaranteed employment. You can always withdraw contributions from Roth IRA penalty free if disaster strikes, so contributions to Roth IRA should always take precedence over contributions to taxable account.

Finally, a lot of people in military change their residency, if possible, to minimize/eliminate state taxes. No idea what your HOR is, but something to consider long term as state taxes definitely play part in financial planning.

Good luck to you!

Fishing50
Posts: 332
Joined: Tue Sep 27, 2016 1:18 am

Re: Pre-Military Seeking Investment Planning

Post by Fishing50 » Sun Jun 02, 2019 10:01 am

Dantheman221-You have set a good course, staying on course will be the challenge. I'm absolutely impressed with your questions, you could do real well financially if you read through the suggested books mentioned above in this thread.

Couple thoughts from a career officer approaching retirement in 2yrs at 50 yrs old to go fishing.

Financial Priorities:
1. Emergency Fund is most important. I recommend keeping only enough cash for a round trip plane ticket home if something devastating happens, after that get the rest of the money invested. For tax efficiency I recommend total stock market equity funds and total international stock funds in taxable account to build a taxable account. If times are good you can sell investments with favorable tax rate for capital gains to make purchases. If times are really good, you can use introductory 0% APR to finance for a few months for purchases or emergency. I recommend avoiding REITS, bonds, STAR funds, target date funds in taxable due to much more favorable tax treatment of equities. I invested my new car fund in low cost, Russell 1000 ETF (IWB) in 2003--since then I've financed cars at favorable rates, so we've kept the investment. We'll probably never sell it, but we are now spending the dividends each year.

2. Contribute to Roth TSP to the max match which has some conditions and limitations. Maxing Roth TSP and possible tax exempt contributions in the combat tax exclusion zone would be spectacular, but you may not have enough income. Roth TSP is absolutely the correct choice early in your career in the 12% tax bracket.

3. Max out Roth IRA every year. Roth IRA is better than TSP because you can withdraw contributions (not earnings) anytime for any reason. Roth IRA is a great place for REITs, emerging markets, sector tilts, etc.

4. Roth TSP to the max. Your 70yr old self will be very happy with LARGE Roth balances. Life happens along the way, and income needs to fund life desires too.

5. Taxable investing. At the cost of max TSP, my younger self kept a small amount going into taxable investments with aspiration of buying stuff. Along the way we've got a mortgage, bought cars & motorcycles, and traveled without spending from taxable investments in order to avoid capital gains tax. TSP vs Taxable is very close option. Having taxable investments to pay for a car is very nice, but I've always found other ways to finance those needs. During our current PCS, we're floating at least $20K on an introductory 0% APR credit card. Roth TSP wasn't available in my early days, but it is a worth very strong consideration to max early in your career. Maybe get some Roth TSP money invested early in your career, and you can ease off later to fund life's desires. Don't let excessive investing goals cause you to let life pass you by in exotic ports of call or exciting duty stations.

- Automated investments is spectacular.

- Tune out the noise, total stock market equity funds are a better bet for the long run. My bet on GE failed miserably, we recently sold after a decade of breaking even on a once highly reliable dividend producing company sold to retirees with little argument. Any tech or pharma company could do the same to you. Feel free to purchase a sector ETF in Roth IRA if you need to learn lessons the hard way, otherwise read the recommended books and settle on boring index funds. Nedsaid 'How do you like my Doo' is a great thread about decades of trying to the beat the market.

-Many Bogleheads are happy with Vanguard, Fidelity, and Schwab. Vanguard automated transactions aren't particularly intuitive, but I haven't researched very well because because we max Roth IRA on the first trading day of each year. Automatic dedcutions from Navy Federal Credit Union work extremely well. I recommend selling Wealthfront and other investments in favor of lower cost index funds at one of the mentioned providers.

No need to make any changes before Basic Training, you'll have time in the future to sort out your finances. Keeping that bonus money in a saving account for a while is a better option than rushing into a poor decision. Good Luck in Basic Training, we look forward to hearing from you in a couple months. :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
Dantheman221
Posts: 16
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 10:13 am

snowman wrote:
Sun Jun 02, 2019 9:52 am
OP,

First, let me say I am not military personnel, so I cannot comment on some specific questions of yours. However, my son just commissioned with AF last month and will start AD next month, so we have done similar financial planning over the last few months. With that said, I think you have a great plan, and you got some excellent advice from other posters already. My advice will be more “around the edges” as you are 90% there already.

1. Max out Roth TSP. That is the single best thing you can do now. I do not know your pay level, but if you can afford it, do it.

2. Open taxable, traditional IRA, and Roth IRA accounts at Vanguard. Put any savings after maxing out Roth TSP into Vanguard taxable account, and let it earn interest in their excellent MMF. Then, next spring when you do your taxes for 2019, you decide whether to invest it in traditional or Roth IRA. The reason to even consider traditional IRA for 2019 tax year is that it may decrease your AGI to the point where you may qualify for saver’s credit.

3. Starting in 2020, make a plan to max out both Roth TSP and Roth IRA.

4. As your pay increases, and you pocket BAH (if possible), put any extra money into Vanguard taxable account.

5. Open CMA account at Fidelity. That will essentially be your fee-free high yield checking account where DD goes, and link it to your Vanguard investment account. Not only will you earn interest, but you will get no-fee ATM card around the world for cash withdrawals.

Now, as far as what investments to buy in which account, opinions will vary, so just make sure whatever you choose you are comfortable sticking with for the long term. Lifecycle funds are good, but personally I am not a fan of bonds at such an early age, and I like your plan of buying C, S and I funds better. Again, you cannot go wrong either way, so just pick one and stick with it!

As others pointed out, automation is the key. If you decide to auto invest in MFs at Vanguard Roth IRA, and you don’t yet have $3K to buy MFs, open Roth at Fidelity as well, and invest in their zero funds as they have no minimums and no expense fees.

Keep your EF at a minimum, maybe $5K, probably in Vanguard taxable account in prime MMF. Unless you screw up really bad, you have guaranteed employment. You can always withdraw contributions from Roth IRA penalty free if disaster strikes, so contributions to Roth IRA should always take precedence over contributions to taxable account.

Finally, a lot of people in military change their residency, if possible, to minimize/eliminate state taxes. No idea what your HOR is, but something to consider long term as state taxes definitely play part in financial planning.

Good luck to you!
I don't think I can apply for savers credit this year since I'd be considered a student while studying in A-school for a year. And, doesn't Roth makes sense in that scenario anyway? Doesn't traditional only get taxed when you decide to withdraw your funds or am I missing something?

Fidelity CMA is 0.37% rate which seems really low for an account when online savings and MMAs offer. And, my Navy Fed account which will be my direct deposit account provided me with cash a day in advance which I can then transfer no cost ACH to savings and investment accounts in addition to having atm rebated as well, not that I'd be using it for most purchases anyway, that's what credit cards cash back and points are for.

I'm not a fan of bonds early on either, and the retirement goal 2060 seems to favor international way more than I am comfortable with and it's 5 year return doesn't seem as high as I want it to be personally.

I'm already a resident in a military tax free state but I plan on moving west coast to a similar state.

Topic Author
Dantheman221
Posts: 16
Joined: Sat Jun 01, 2019 6:53 pm

Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 10:27 am

Fishing50 wrote:
Sun Jun 02, 2019 10:01 am
Dantheman221-You have set a good course, staying on course will be the challenge. I'm absolutely impressed with your questions, you could do real well financially if you read through the suggested books mentioned above in this thread.

Couple thoughts from a career officer approaching retirement in 2yrs at 50 yrs old to go fishing.

Financial Priorities:
1. Emergency Fund is most important. I recommend keeping only enough cash for a round trip plane ticket home if something devastating happens, after that get the rest of the money invested. For tax efficiency I recommend total stock market equity funds and total international stock funds in taxable account to build a taxable account. If times are good you can sell investments with favorable tax rate for capital gains to make purchases. If times are really good, you can use introductory 0% APR to finance for a few months for purchases or emergency. I recommend avoiding REITS, bonds, STAR funds, target date funds in taxable due to much more favorable tax treatment of equities. I invested my new car fund in low cost, Russell 1000 ETF (IWB) in 2003--since then I've financed cars at favorable rates, so we've kept the investment. We'll probably never sell it, but we are now spending the dividends each year.

2. Contribute to Roth TSP to the max match which has some conditions and limitations. Maxing Roth TSP and possible tax exempt contributions in the combat tax exclusion zone would be spectacular, but you may not have enough income. Roth TSP is absolutely the correct choice early in your career in the 12% tax bracket.

3. Max out Roth IRA every year. Roth IRA is better than TSP because you can withdraw contributions (not earnings) anytime for any reason. Roth IRA is a great place for REITs, emerging markets, sector tilts, etc.

4. Roth TSP to the max. Your 70yr old self will be very happy with LARGE Roth balances. Life happens along the way, and income needs to fund life desires too.

5. Taxable investing. At the cost of max TSP, my younger self kept a small amount going into taxable investments with aspiration of buying stuff. Along the way we've got a mortgage, bought cars & motorcycles, and traveled without spending from taxable investments in order to avoid capital gains tax. TSP vs Taxable is very close option. Having taxable investments to pay for a car is very nice, but I've always found other ways to finance those needs. During our current PCS, we're floating at least $20K on an introductory 0% APR credit card. Roth TSP wasn't available in my early days, but it is a worth very strong consideration to max early in your career. Maybe get some Roth TSP money invested early in your career, and you can ease off later to fund life's desires. Don't let excessive investing goals cause you to let life pass you by in exotic ports of call or exciting duty stations.

- Automated investments is spectacular.

- Tune out the noise, total stock market equity funds are a better bet for the long run. My bet on GE failed miserably, we recently sold after a decade of breaking even on a once highly reliable dividend producing company sold to retirees with little argument. Any tech or pharma company could do the same to you. Feel free to purchase a sector ETF in Roth IRA if you need to learn lessons the hard way, otherwise read the recommended books and settle on boring index funds. Nedsaid 'How do you like my Doo' is a great thread about decades of trying to the beat the market.

-Many Bogleheads are happy with Vanguard, Fidelity, and Schwab. Vanguard automated transactions aren't particularly intuitive, but I haven't researched very well because because we max Roth IRA on the first trading day of each year. Automatic dedcutions from Navy Federal Credit Union work extremely well. I recommend selling Wealthfront and other investments in favor of lower cost index funds at one of the mentioned providers.

No need to make any changes before Basic Training, you'll have time in the future to sort out your finances. Keeping that bonus money in a saving account for a while is a better option than rushing into a poor decision. Good Luck in Basic Training, we look forward to hearing from you in a couple months. :beer
Thank you for the sound advice, reassurance and recommendations. I'll see what I can do to follow a similar path. And, you're right, I should be focussing and remembering the entire chain of command instead of worrying about investing money I haven't earned yet, haha.

snowman
Posts: 894
Joined: Thu Jan 31, 2013 12:59 pm

Re: Pre-Military Seeking Investment Planning

Post by snowman » Sun Jun 02, 2019 10:43 am

Dantheman221 wrote:
Sun Jun 02, 2019 10:13 am

I don't think I can apply for savers credit this year since I'd be considered a student while studying in A-school for a year. And, doesn't Roth makes sense in that scenario anyway? Doesn't traditional only get taxed when you decide to withdraw your funds or am I missing something?

Fidelity CMA is 0.37% rate which seems really low for an account when online savings and MMAs offer. And, my Navy Fed account which will be my direct deposit account provided me with cash a day in advance which I can then transfer no cost ACH to savings and investment accounts in addition to having atm rebated as well, not that I'd be using it for most purchases anyway, that's what credit cards cash back and points are for.

I'm not a fan of bonds early on either, and the retirement goal 2060 seems to favor international way more than I am comfortable with and it's 5 year return doesn't seem as high as I want it to be personally.

I'm already a resident in a military tax free state but I plan on moving west coast to a similar state.
If you will be filing 2019 taxes in early 2020 NOT as dependent on someone else's taxes, you are qualified for credit if your AGI is low enough. So the whole point of traditional IRA in that scenario is to lower your AGI so you actually qualify for credit. So not only are you saving for retirement, and lowering your taxes, but the government will reward you for doing so with additional money, in which case it may be better option financially compared to Roth IRA.

This really is not a big deal, it's just one of those little examples of "hey, free money, why not?" So instead of contributing $6K into Roth, you keep $6K in taxable MMF, and when doing taxes in early 2020, tax software (or CPA) will tell you how much (if any) to put into traditional and how much into Roth. It's always good to have options, and if you have already contributed to Roth, you will not have that option, that's all. Again, not a big deal, if it seems too complicated, just put $6K into Roth and be done with it.

As far as Fidelity CMA account goes, you have the option of designating your core position to be MMF, not cash. Your DD will hit your Fidelity account day earlier compared to other banks, and will go straight to MMF (SPAXX). So you are earning 2%+ interest immediately, and have no ACH to mess with. You can also buy different MMFs if you wish as Fidelity CMA account is also brokerage account. There are many threads here on this subject.

Hockey10
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Location: Philadelphia suburbs

Re: Pre-Military Seeking Investment Planning

Post by Hockey10 » Sun Jun 02, 2019 3:02 pm

OP, glad to see that you have no debt. Try to keep it that way for as long as you can.

I knew way too many soldiers in the Army back in the 1980s who were younger than you that were buried in debt. The most likely culprit was a car loan with about a 35% interest rate. The vultures that worked in the used car lots outsides the gates at Ft. Bragg would prey on the young soldiers who had a paycheck, but no knowledge of personal finance.

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mokaThought
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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sun Jun 02, 2019 3:05 pm

Dantheman221 wrote:
Sun Jun 02, 2019 7:16 am
For sure. I'm already getting a $10k signing bonus which completely covers savings account after A school. Reenlistment bonuses are around $75k for Zone A, I believe. Probably changed now.

Also, do you agree that you'd rather be stationed at Yokosuka? Most people I ask tend to think that. Closer to civilization and big cities and all.
Sasebo is definitely still civilization, but it's much less US-influenced, farther from neat things to do, and has less on-base resources. For example, the main-base commissary feels like a corner store, and you have to wait for an optometrist to make a special trip from Yokosuka in order to get an appointment. I like the feel of Sasebo, and I much prefer amphibs over CRUDES, but most sailors prefer Yokosuka.

In either case, consider a car to be a consumption item, not a necessary expense. I managed fine without a car in Sasebo for all 2.5 years as a single guy. I was geo-bachelor in Yokosuka for eight months and acquired a car shortly before my wife arrived. Cars in Japan are cheap for SOFA (Status of Forces Agreement) personnel because the local laws that penalize citizens for driving beaters don't apply to us, so you need not think of it in terms of typical costs in-CONUS. I paid about $2,500 for my car, a 2001 Toyota Opa — think Prius minus the hybrid system.

If you do decide to get a car, avoid the various car flippers on base and find someone at your command who is leaving and is selling his or her car. Then avoid the Autoport car mechanics like the plague. Buy the oil on base (much cheaper) and learn to change it yourself. Take it to Autobacs (Japanese auto parts and mechanic business) for anything you can't learn to do.

Feel free to DM if you need more local info!
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

Topic Author
Dantheman221
Posts: 16
Joined: Sat Jun 01, 2019 6:53 pm

Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Sun Jun 02, 2019 4:48 pm

mokaThought wrote:
Sun Jun 02, 2019 3:05 pm
Dantheman221 wrote:
Sun Jun 02, 2019 7:16 am
For sure. I'm already getting a $10k signing bonus which completely covers savings account after A school. Reenlistment bonuses are around $75k for Zone A, I believe. Probably changed now.

Also, do you agree that you'd rather be stationed at Yokosuka? Most people I ask tend to think that. Closer to civilization and big cities and all.
Sasebo is definitely still civilization, but it's much less US-influenced, farther from neat things to do, and has less on-base resources. For example, the main-base commissary feels like a corner store, and you have to wait for an optometrist to make a special trip from Yokosuka in order to get an appointment. I like the feel of Sasebo, and I much prefer amphibs over CRUDES, but most sailors prefer Yokosuka.

In either case, consider a car to be a consumption item, not a necessary expense. I managed fine without a car in Sasebo for all 2.5 years as a single guy. I was geo-bachelor in Yokosuka for eight months and acquired a car shortly before my wife arrived. Cars in Japan are cheap for SOFA (Status of Forces Agreement) personnel because the local laws that penalize citizens for driving beaters don't apply to us, so you need not think of it in terms of typical costs in-CONUS. I paid about $2,500 for my car, a 2001 Toyota Opa — think Prius minus the hybrid system.

If you do decide to get a car, avoid the various car flippers on base and find someone at your command who is leaving and is selling his or her car. Then avoid the Autoport car mechanics like the plague. Buy the oil on base (much cheaper) and learn to change it yourself. Take it to Autobacs (Japanese auto parts and mechanic business) for anything you can't learn to do.

Feel free to DM if you need more local info!
I worked on bikes and cars in the past so I would actually welcome any hardships with vehicles, more to learn. Plus, the Japanese market has some of my favorite banned cars not available in the US, for now. Might stock up on a few soon to be legal cars and ship them over for the personal collection. Thanks for the additional sorta off-topic info, I'll take it into consideration for my Westpac assignments.

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friar1610
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Re: Pre-Military Seeking Investment Planning

Post by friar1610 » Sun Jun 02, 2019 5:27 pm

mokaThought wrote:
Sat Jun 01, 2019 9:25 pm

Avoid FirstCommand Financial Planning like the plague.


+1

The really annoying thing is that the First Command "financial planner" will likely be a retired military officer or CPO/NCO who will try very hard to come across as a comrade in arms who has nothing but your best interests at heart. Don't even think about going to the free steak dinner (or whatever they're doing these days).
Friar1610

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Re: Pre-Military Seeking Investment Planning

Post by curmudgeon » Sun Jun 02, 2019 5:45 pm

I think you've gotten a fair bit of good advice on this thread, and it seems like you have some good plans in mind. If you keep on in this path, you'll likely end up in good shape regardless of the details. I'll throw in a few general bits of advice based on what I've seen among friends and relatives in the military:

1) Spending too much on cars traps lots of military members (and civilians as well). If you stick to only what you can buy for cash, whether used or new, it will go far to keeping you ahead of the game.

2) Being to too much of a hurry to get married is another hazard. Sometimes junior enlisted see this as a quick way out of the barracks, or to get extra allowances, but it can be expensive and messy to untangle later. Take your time on this one.

3) Don't get too carried away about planning way out in the future. There can be lots of surprising twists and turns to a military career. It's good to have ideas about where you would like to be going, but focus the main energies on the near-term issues. Your ideas about what you'll be doing next year can occasionally be blown away by new orders.

RanchHand
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Re: Pre-Military Seeking Investment Planning

Post by RanchHand » Sun Jun 02, 2019 7:00 pm

spooky105 wrote:
Sun Jun 02, 2019 12:05 am

WHERE TO PUT YOUR MONEY

Make all of your contributions to Roth accounts. You income tax rate is likely the lowest it will ever be in your life (especially if you sprinkle some deployments in there) so pay the bill now, let the money compound tax free, and then come out tax free in retirement.
Spooky, lots of great advice. I'd just like to chime in on this one bit. It may be beneficial for the time being when deployments are off the table (boot camp, MOS school, etc) to have a Traditional IRA instead of Roth. My rationale for this is, if OP does get deployed somewhere with CTZE, income will be super low for the year, and he can convert partial or full traditional to Roth at that time. I think this approach may be more tax efficient by taking the highest taxed $6k of income from a regular year and adding it back in a lower bracket due to the CZTE. I'm pretty new at this myself, but just converted 2 traditional accounts to Roth while in CZTE status. If OP does go this route, it has to be with an IRA. TSP doesn't let you do conversions.

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mokaThought
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Re: Pre-Military Seeking Investment Planning

Post by mokaThought » Sun Jun 02, 2019 9:10 pm

RanchHand wrote:
Sun Jun 02, 2019 7:00 pm
spooky105 wrote:
Sun Jun 02, 2019 12:05 am

WHERE TO PUT YOUR MONEY

Make all of your contributions to Roth accounts. You income tax rate is likely the lowest it will ever be in your life (especially if you sprinkle some deployments in there) so pay the bill now, let the money compound tax free, and then come out tax free in retirement.
Spooky, lots of great advice. I'd just like to chime in on this one bit. It may be beneficial for the time being when deployments are off the table (boot camp, MOS school, etc) to have a Traditional IRA instead of Roth. My rationale for this is, if OP does get deployed somewhere with CTZE, income will be super low for the year, and he can convert partial or full traditional to Roth at that time. I think this approach may be more tax efficient by taking the highest taxed $6k of income from a regular year and adding it back in a lower bracket due to the CZTE. I'm pretty new at this myself, but just converted 2 traditional accounts to Roth while in CZTE status. If OP does go this route, it has to be with an IRA. TSP doesn't let you do conversions.
When I was in a combat zone for a very short period, traditional TSP (Roth didn't exist yet at this point) automatically designated my contribution for that time as "tax-free." I'm not sure if it would be worth the complexity. On top of that, if OP goes to 7th Fleet (western Pacific) like it sounds, extended time in a combat zone is unlikely. At that point, my next thought would be maximizing Savings Deposit Program, which allows up to $10,000 per deployment to grow at 10%.
October: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. —Mark Twain

spooky105
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Re: Pre-Military Seeking Investment Planning

Post by spooky105 » Mon Jun 03, 2019 12:18 am

Is it possible to take the govt matching and convert it to Roth afterwards or is it always traditional until I take the money out?
The contributions by the govt are always traditional. TSP does not allow you to convert from Traditional to Roth or vice versa. However, once you separate from service you can roll your TSP dollars into equivalent IRAs -- Roth money into a Roth IRA and Traditional money into a Traditional IRA. After that, you could convert some or all of the Traditional IRA dollars to Roth, but you would owe a tax bill on those contributions. This would probably not be advantageous unless you timed it with a year of very low taxable income (such as taking a year off between military service and your next career).
Also, since the government won't really match until after 2 years of service, is there a point in contributing to maxing it out at the years prior to the matching? Wouldn't a better option be to max out IRA, put some in a taxable/savings but contribute to the TSP without maxing, especially since I'm trying to save up maybe $500k in the next 10 years that I can take out without penalty and not worry about taking it from Roth IRA?
A couple of thoughts for you here:

1) Right now you have more space in tax advantaged accounts (TSP & IRA) than you have dollars available. At some point in your life that will change. But when it does, you can't go back in time and backfill whatever you didn't use in your younger days. As a result, my advice is to get as much into these accounts as early in life as you can to maximize the benefits. You can always dial it back down the road as life/career plans unfold.

2) You have a stated goal of saving $400k - $500k in about 10 years to start a business after spending the preceding time in the Navy. This strikes me as well-aligned with the typical formula for why most businesses fail: Someone has an idea for a business. They acquire a large lump sum to start (savings, borrowing, etc.). Because they have a large lump sum / believe they needed a large lump sum they overspend on supporting stuff (building leases, staff, supplies, etc.) before firmly establishing whether their product or service will succeed. Finally, the whole thing comes undone because either the product/service wasn't a success or not enough funds remain to ride out the losses over the long periods it takes to gain traction (when the product/service still might fail).

I have no idea what you are picturing when you throw out these numbers in conjunction with "starting a business" and my intention is not to tell you "it can't be done." Rather, I would advocate a different approach than the impression that I am getting. If your intent is to get into business for yourself down the road, then start small with side gigs while you have the steady Navy paycheck. Look around at the problems your peers face and come up with a solution and way to monetize that solution. Start small and build out your skills while the cost of lessons learned doesn't burn too badly. Over time, you'll build something up that you can sell on to someone else for $1,000. Then use that money to start your next venture that you can sell on later for $10,000. And so on. With a bit of luck, you'll be positioned to organically fund that dream business from the snowball of businesses while you were in the Navy. Alternatively, if your dream business is that capital intensive, then doing the above will at least build out your skills so that you can credibly fundraise to get off the ground. In either case, having the mental model that you need to accumulate half a mil to start a business a decade down the road isn't a COA I would recommend, particularly if you're sacrificing your retirement savings at the alter of this idea.

Check out PopUp Business school https://www.popupbusinessschool.co.uk and their appearances on various podcasts for more on this.

3) Worth mentioning that there are multiple ways to access funds in tax advantaged accounts before the stated retirement ages. This article over at the Mad Fientist covers it pretty well, though not military specific https://www.madfientist.com/how-to-acce ... nds-early/. There's more out there about this on the inter webs.
Also, does it count years of service since I entered the Navy after DEP or years of active duty service?
Honestly, not sure which of the dozen or so dates in your military records this is based off. Would guess the "pay date" that will show up on the top of your LES is when the clock officially started. You can reference this date for all of your longevity pay increases.
And, historically, has the target date really worked out or is it mostly recommended for the hand off approach? What would the margin be for self controlled vs retirement date?
Target Date returns are identical to the proportional returns of the constituent parts. There's no magic there. The advantage is not having to second guess yourself every time you look at your asset allocation for rebalancing, etc. You avoid the self doubt and temptation to muck around when domestic has underperformed international 5 years in a row, or market cap X has been on a tear, or sector Y is the where the future is... and so on. It sounds like no big deal until you're knee deep in your investments and your portfolio has underperformed for a sustained period of time.
I don't plan on beating the market but, I tend do think I understand at least some of the market, especially tech to know what's going to go up or down and what to buy when for value investing.
Everyone thinks this. And everyone is wrong. Above average investor returns are yours if you can just capture the market return and not screw with it along the way.

krafty81
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Re: Pre-Military Seeking Investment Planning

Post by krafty81 » Mon Jun 03, 2019 6:45 am

Some little known facts.

When deployed in a combat zone you can contribute to a govt savings account that pays 10% tax free. Up to 10K. I did it three times in my career.

Your TSP contribution can be up to 53K in a combat zone.

kelvan80
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Re: Pre-Military Seeking Investment Planning

Post by kelvan80 » Mon Jun 03, 2019 7:04 am

krafty81 wrote:
Mon Jun 03, 2019 6:45 am
Some little known facts.

When deployed in a combat zone you can contribute to a govt savings account that pays 10% tax free. Up to 10K. I did it three times in my career.

Your TSP contribution can be up to 53K in a combat zone.
Yes this is the Savings Deposit Program. If you can, take the Million Dollar Sailor course which I think is now offered on NKO. You don't need to change your Home of Record since you mentioned you were already in a tax free state for military when you entered. BRS does match a little the first tattoo years so at least make sure you are doing 1% but really the costs in TSP can't be beat so stick as much in there as you can. When you say $400k in ten years are you saving outside of retirement vehicles because you will take a penalty hit if you remove funds from the TSP early unless you have a hardship or play by the rules of 72t or convert.

RanchHand
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Re: Pre-Military Seeking Investment Planning

Post by RanchHand » Mon Jun 03, 2019 7:34 am

krafty81 wrote:
Mon Jun 03, 2019 6:45 am
Some little known facts.

When deployed in a combat zone you can contribute to a govt savings account that pays 10% tax free. Up to 10K. I did it three times in my career.

Your TSP contribution can be up to 53K in a combat zone.
The SDP is still a great deal at guaranteed 10% interest, but you do pay tax on the interest.
(https://comptroller.defense.gov/Portals ... 07a_51.pdf)

Your TSP contribution in a CZTE status can be up to $56k now, but that space is only available while in the CZTE status. In other words, just because you were in a CZTE status your yearly limit doesn't increase, you can only contribute to that extra space while in a CZTE status. (https://www.tsp.gov/PlanParticipation/E ... imits.html)

Topic Author
Dantheman221
Posts: 16
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Mon Jun 03, 2019 7:44 am

spooky105 wrote:
Mon Jun 03, 2019 12:18 am
Is it possible to take the govt matching and convert it to Roth afterwards or is it always traditional until I take the money out?
The contributions by the govt are always traditional. TSP does not allow you to convert from Traditional to Roth or vice versa. However, once you separate from service you can roll your TSP dollars into equivalent IRAs -- Roth money into a Roth IRA and Traditional money into a Traditional IRA. After that, you could convert some or all of the Traditional IRA dollars to Roth, but you would owe a tax bill on those contributions. This would probably not be advantageous unless you timed it with a year of very low taxable income (such as taking a year off between military service and your next career).
Also, since the government won't really match until after 2 years of service, is there a point in contributing to maxing it out at the years prior to the matching? Wouldn't a better option be to max out IRA, put some in a taxable/savings but contribute to the TSP without maxing, especially since I'm trying to save up maybe $500k in the next 10 years that I can take out without penalty and not worry about taking it from Roth IRA?
A couple of thoughts for you here:

1) Right now you have more space in tax advantaged accounts (TSP & IRA) than you have dollars available. At some point in your life that will change. But when it does, you can't go back in time and backfill whatever you didn't use in your younger days. As a result, my advice is to get as much into these accounts as early in life as you can to maximize the benefits. You can always dial it back down the road as life/career plans unfold.

2) You have a stated goal of saving $400k - $500k in about 10 years to start a business after spending the preceding time in the Navy. This strikes me as well-aligned with the typical formula for why most businesses fail: Someone has an idea for a business. They acquire a large lump sum to start (savings, borrowing, etc.). Because they have a large lump sum / believe they needed a large lump sum they overspend on supporting stuff (building leases, staff, supplies, etc.) before firmly establishing whether their product or service will succeed. Finally, the whole thing comes undone because either the product/service wasn't a success or not enough funds remain to ride out the losses over the long periods it takes to gain traction (when the product/service still might fail).

I have no idea what you are picturing when you throw out these numbers in conjunction with "starting a business" and my intention is not to tell you "it can't be done." Rather, I would advocate a different approach than the impression that I am getting. If your intent is to get into business for yourself down the road, then start small with side gigs while you have the steady Navy paycheck. Look around at the problems your peers face and come up with a solution and way to monetize that solution. Start small and build out your skills while the cost of lessons learned doesn't burn too badly. Over time, you'll build something up that you can sell on to someone else for $1,000. Then use that money to start your next venture that you can sell on later for $10,000. And so on. With a bit of luck, you'll be positioned to organically fund that dream business from the snowball of businesses while you were in the Navy. Alternatively, if your dream business is that capital intensive, then doing the above will at least build out your skills so that you can credibly fundraise to get off the ground. In either case, having the mental model that you need to accumulate half a mil to start a business a decade down the road isn't a COA I would recommend, particularly if you're sacrificing your retirement savings at the alter of this idea.

Check out PopUp Business school https://www.popupbusinessschool.co.uk and their appearances on various podcasts for more on this.

3) Worth mentioning that there are multiple ways to access funds in tax advantaged accounts before the stated retirement ages. This article over at the Mad Fientist covers it pretty well, though not military specific https://www.madfientist.com/how-to-acce ... nds-early/. There's more out there about this on the inter webs.
Also, does it count years of service since I entered the Navy after DEP or years of active duty service?
Honestly, not sure which of the dozen or so dates in your military records this is based off. Would guess the "pay date" that will show up on the top of your LES is when the clock officially started. You can reference this date for all of your longevity pay increases.
And, historically, has the target date really worked out or is it mostly recommended for the hand off approach? What would the margin be for self controlled vs retirement date?
Target Date returns are identical to the proportional returns of the constituent parts. There's no magic there. The advantage is not having to second guess yourself every time you look at your asset allocation for rebalancing, etc. You avoid the self doubt and temptation to muck around when domestic has underperformed international 5 years in a row, or market cap X has been on a tear, or sector Y is the where the future is... and so on. It sounds like no big deal until you're knee deep in your investments and your portfolio has underperformed for a sustained period of time.
I don't plan on beating the market but, I tend do think I understand at least some of the market, especially tech to know what's going to go up or down and what to buy when for value investing.
Everyone thinks this. And everyone is wrong. Above average investor returns are yours if you can just capture the market return and not screw with it along the way.
I do intend on having a test phase of the business and a small public fundraise test to determine if there is demand for the service I'd be offering. I won't put too much money into it until I'm sure there is at least some demand and growth possible. It's not entirely for-profit either, I don't expect it to make me a lot of money, just something supplemental that I earn while enjoying what I'd be doing. The cost I calculated are actually significantly lower but based on my father's experience with businesses, it's best to be prepared for the worst. Either way, whether I move forward with the business or not, I'm still not entirely sure how much I'd actually be comfortable with in retirement, that's not something I can quite estimate; I have no dependents, no family so I can't really provide a good estimate on how much would be enough but I believe that could be upwards of a couple million accounting for inflation and family needs. Maxing out Roth TSP, IRA, I believe I calculated to be quite a bit more than that. Then, I'd run into the problem of having too much later in life when I can't be as active throughout the day. Not only that but, I don't want my dependents or family to rely on the funds I provided to go about the world and that amount of money changes people which is why planning out financially now is so important. I don't want to be that guy who buys expensive stuff because I can or bribe my kids/grandkids from everything they complain about. I'm only human and I can't trust myself to stay conservative after coming into large amounts of money, I don't think anyone really can.

Topic Author
Dantheman221
Posts: 16
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Mon Jun 03, 2019 7:46 am

kelvan80 wrote:
Mon Jun 03, 2019 7:04 am
Yes this is the Savings Deposit Program. If you can, take the Million Dollar Sailor course which I think is now offered on NKO. You don't need to change your Home of Record since you mentioned you were already in a tax free state for military when you entered. BRS does match a little the first tattoo years so at least make sure you are doing 1% but really the costs in TSP can't be beat so stick as much in there as you can. When you say $400k in ten years are you saving outside of retirement vehicles because you will take a penalty hit if you remove funds from the TSP early unless you have a hardship or play by the rules of 72t or convert.
Other savings vehicle, correct.

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djpeteski
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Re: Pre-Military Seeking Investment Planning

Post by djpeteski » Mon Jun 03, 2019 8:44 am

Dantheman221 wrote:
Sat Jun 01, 2019 8:48 pm
Surface Warfare in the Navy. Ship deployments overseas. Auto advancement to E-3 maybe E-4 after schools which gets me OHA, split rent multiple ways between other squids for a single apartment and pocket the rest so I expect to get much more cash out. I don't mind being overseas for a while and actually prefer it but, I will try to find a conus duty station after 10 years to focus more on my business or go into reserves for a while. After I get that sorted, looking to spend another 10 years in for the pension and retire and go full time into my business.
I thank you for your service and will say some things from my own time as enlisted. Its been a while since I have been in, but from your post it seems that you are being fed some false information, presumably from a recruiter.

1) You need an emergency fund.

2) While you will be getting a nice head start to auto advance to E-3, the pay rates are near poverty level. It is good that you have a focus on investing, as most of your peers will spend an inordinate amount of their pay on a car. After all it is almost the only thing they can reasonably own. However, don't expect to be making a lot of money.

3) You are going into the Navy, expect to be at sea. Shore duty billets are high coveted and hard to come by. Even after 10 years.

4) As an unmarried EM, you will be expected to live in the barracks. Getting off base housing is very unlikely to happen. Even if you do rooming with a bunch of others is fraught with additional problems such as people changing duty stations all the time.

5) If you retire after 20 years with part of it as full timer, part of it reserves, you do not receive a pension until 55.

6) You will be lonely. Upon coming back to shore, you might enter into a long term relationship to satisfy that loneliness. This often leads to a quick marriage, quick pregnancy, divorce and then child support payments. So many EMs are undone by this. Resist the temptation, being married in the navy is about impossible.

Having said all that, it is about what you put into it. Use your time wisely. Others will try to squash your dreams, but keep faith in them and yourself. Take advantage of the tuition assistance program and the online colleges. You can get an education while serving at almost no cost to you. If you have the ability to become an officer, take it. Don't listen to your doubts or fears. Your life will be much less miserable, and life will be much better on the outside.

Despite promises of adventure, there is a lot of time spent doing mundane tasks such as waiting and picking up cigarette butts smoked by others. Its very easy to fall into the trap of complaining about life, but your goal should be on how to better your own.

Topic Author
Dantheman221
Posts: 16
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Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Mon Jun 03, 2019 9:18 am

djpeteski wrote:
Mon Jun 03, 2019 8:44 am
Dantheman221 wrote:
Sat Jun 01, 2019 8:48 pm
Surface Warfare in the Navy. Ship deployments overseas. Auto advancement to E-3 maybe E-4 after schools which gets me OHA, split rent multiple ways between other squids for a single apartment and pocket the rest so I expect to get much more cash out. I don't mind being overseas for a while and actually prefer it but, I will try to find a conus duty station after 10 years to focus more on my business or go into reserves for a while. After I get that sorted, looking to spend another 10 years in for the pension and retire and go full time into my business.
I thank you for your service and will say some things from my own time as enlisted. Its been a while since I have been in, but from your post it seems that you are being fed some false information, presumably from a recruiter.

1) You need an emergency fund.

2) While you will be getting a nice head start to auto advance to E-3, the pay rates are near poverty level. It is good that you have a focus on investing, as most of your peers will spend an inordinate amount of their pay on a car. After all it is almost the only thing they can reasonably own. However, don't expect to be making a lot of money.

3) You are going into the Navy, expect to be at sea. Shore duty billets are high coveted and hard to come by. Even after 10 years.

4) As an unmarried EM, you will be expected to live in the barracks. Getting off base housing is very unlikely to happen. Even if you do rooming with a bunch of others is fraught with additional problems such as people changing duty stations all the time.

5) If you retire after 20 years with part of it as full timer, part of it reserves, you do not receive a pension until 55.

6) You will be lonely. Upon coming back to shore, you might enter into a long term relationship to satisfy that loneliness. This often leads to a quick marriage, quick pregnancy, divorce and then child support payments. So many EMs are undone by this. Resist the temptation, being married in the navy is about impossible.

Having said all that, it is about what you put into it. Use your time wisely. Others will try to squash your dreams, but keep faith in them and yourself. Take advantage of the tuition assistance program and the online colleges. You can get an education while serving at almost no cost to you. If you have the ability to become an officer, take it. Don't listen to your doubts or fears. Your life will be much less miserable, and life will be much better on the outside.

Despite promises of adventure, there is a lot of time spent doing mundane tasks such as waiting and picking up cigarette butts smoked by others. Its very easy to fall into the trap of complaining about life, but your goal should be on how to better your own.
A lot of good advice. I've been in all sorts of relationships before and I found a way to satisfy my loneliness, especially because as a kid, I moved around a lot so rushing into some kind of relationship is something I won't do, especially after my first crush. I know how much I'd be earning going in and I know it's barely poverty on just basic pay and my recruiters actually said the same. As much as they are trying to bring in people, they haven't really lied about anything or mislead me as far as I can tell and I respect them for that, I know others get it different. They also told me that E-5 get guaranteed BAH and sometimes E-4s get it if barracks are crowded. I suppose staying active would be the better option in that case for pension. I have a friend who was in for four years and he told me what day to day was like and he was also an FC so possibly the same rate as me. I do intend on attempting to utilize as much TA as I can but, I believe there's restrictions now on first 2 years of service and the amount of credits you can take is reduced. I'm also not sure if it would be the most efficient becoming an officer. It would take a while to earn a degree and quite a lot of time devoted to it, then OCS, then O-1 all over again to O-5 if I'm lucky. I think it might be more time and cost effective to become CWO. Pays like a rank down compared to commissioned officers but I'm not sure. Also, isn't there like a 60/40 billet split between sea and shore? At least, that's what COOL says for my rate. And besides, people despise shore duty unless they've been in a sub for years or on a ship and want weekends and a 9-5.
Last edited by Dantheman221 on Mon Jun 03, 2019 6:23 pm, edited 2 times in total.

RanchHand
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Re: Pre-Military Seeking Investment Planning

Post by RanchHand » Mon Jun 03, 2019 9:45 am

djpeteski wrote:
Mon Jun 03, 2019 8:44 am

5) If you retire after 20 years with part of it as full timer, part of it reserves, you do not receive a pension until 55.
The age when you can start to draw a pension is actually age 60 now. If you are in the reserves and activate in support of a named contingency operation, the amount of time you were activated (up to a maximum of 3 months per fiscal year) will be applied as credit to move the retirement age earlier. (https://militarypay.defense.gov/Pay/Ret ... serve.aspx)

SteveJones
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Re: Pre-Military Seeking Investment Planning

Post by SteveJones » Wed Jun 05, 2019 4:36 am

Dantheman221 wrote:
Sun Jun 02, 2019 8:01 am
SteveJones wrote:
Sun Jun 02, 2019 5:27 am
18 yrs in the Navy here.
At 23 yrs old do you already have a degree? Or is this one of those 'last chance to do something with my life' type things? I was the latter when I was 21 so I get it. If you have a degree I'd strongly consider a commission and not an enlistment.

As a junior enlisted sailor don't think you can count on BAH as part of your compensation package. It has to be approved. You may live in the barrack for the first few years or even on the ship if you get out there. While in the Barracks you can expect $700-$800 checks twice a month. Not bad considering you don't pay for housing or food, but that my not be what is in your head. The worst thing you could do spend one of those checks per month on a car and insurance!

Open the TSP ASAP and start investing heavily in the C, S, and I fund. I'd do 70% C, 20% S, and 10% I. There are other options, but this is the most convenient and TSP is designed for military allotments. You won't make enough money to max out TSP let alone open an IRA. I'd focus on the TSP which will provide a good return with the correct breakdown and it is all done for your in boot camp. You have enough to worry about as you go through your initial training and quals on the ship.

$10,000 in a savings account is fine especially since you will be renting.

Focus on learning how to be a lethal part of the force first then deviate from this or a similar simple plan.
Never got to finish, grades got bad but enough for me to get the credit bonus for enlisting. Would've had to take some loans out and I still wasn't sure what I really felt passionate about, still don't. I would've went commissioned if I could.

How often do rates above E-5 get approved for BAH? I expect to be getting pretty low base pay and I accounted for the worst of circumstances but just like boot, whatever you tend to think or prepare for, it's much worse in reality. I don't plan on getting a car anytime soon and only bills and insurance would be for the phone, internet and renters insurance since barracks are notorious for theft. That's around $100/month depending on zip code. I should be able to max out TSP and IRA after E-5 and 4 years of service, especially if I'm getting foreign language pay and BAH/OHA. I don't expect to max it out the first few years but good work ethics and being as likeable as an MPO in boot or a CS is a good way to get there, especially around command.
Not investing related, but be careful about going into this thinking you know everything about what you are about to enter. You're right you won't be able to max out the TSP right away. By the time you are an E-5 you will need a car so start saving in a sinking fund to pay cash for one. Unfortunately, in the current construct making rank is a crapshoot. The number #1 E5 at my command (works for me) has been unable to advance in the 3 years he has been ranked #1. Quotas, test scores, etc all create a crapshoot dynamic. I was enlisted for four years before I commissioned and never dealt with theft. If you want to advance quickly, get pro pay, and bonuses you should strongly consider going the Nuke route.

Maverick3320
Posts: 515
Joined: Tue May 12, 2015 2:59 pm

Re: Pre-Military Seeking Investment Planning

Post by Maverick3320 » Wed Jun 05, 2019 4:53 am

Military here. Sorry if this has already been mentioned, but one of the best things you could do in terms of investing in yourself would be to get a commission. Check the pay tables and realize they affect every single pension check you will collect for the rest of your life after retirement - possibly 40 or 50 years worth of checks.

Topic Author
Dantheman221
Posts: 16
Joined: Sat Jun 01, 2019 6:53 pm

Re: Pre-Military Seeking Investment Planning

Post by Dantheman221 » Wed Jun 05, 2019 7:26 am

SteveJones wrote:
Wed Jun 05, 2019 4:36 am
Dantheman221 wrote:
Sun Jun 02, 2019 8:01 am
SteveJones wrote:
Sun Jun 02, 2019 5:27 am
18 yrs in the Navy here.
At 23 yrs old do you already have a degree? Or is this one of those 'last chance to do something with my life' type things? I was the latter when I was 21 so I get it. If you have a degree I'd strongly consider a commission and not an enlistment.

As a junior enlisted sailor don't think you can count on BAH as part of your compensation package. It has to be approved. You may live in the barrack for the first few years or even on the ship if you get out there. While in the Barracks you can expect $700-$800 checks twice a month. Not bad considering you don't pay for housing or food, but that my not be what is in your head. The worst thing you could do spend one of those checks per month on a car and insurance!

Open the TSP ASAP and start investing heavily in the C, S, and I fund. I'd do 70% C, 20% S, and 10% I. There are other options, but this is the most convenient and TSP is designed for military allotments. You won't make enough money to max out TSP let alone open an IRA. I'd focus on the TSP which will provide a good return with the correct breakdown and it is all done for your in boot camp. You have enough to worry about as you go through your initial training and quals on the ship.

$10,000 in a savings account is fine especially since you will be renting.

Focus on learning how to be a lethal part of the force first then deviate from this or a similar simple plan.
Never got to finish, grades got bad but enough for me to get the credit bonus for enlisting. Would've had to take some loans out and I still wasn't sure what I really felt passionate about, still don't. I would've went commissioned if I could.

How often do rates above E-5 get approved for BAH? I expect to be getting pretty low base pay and I accounted for the worst of circumstances but just like boot, whatever you tend to think or prepare for, it's much worse in reality. I don't plan on getting a car anytime soon and only bills and insurance would be for the phone, internet and renters insurance since barracks are notorious for theft. That's around $100/month depending on zip code. I should be able to max out TSP and IRA after E-5 and 4 years of service, especially if I'm getting foreign language pay and BAH/OHA. I don't expect to max it out the first few years but good work ethics and being as likeable as an MPO in boot or a CS is a good way to get there, especially around command.
Not investing related, but be careful about going into this thinking you know everything about what you are about to enter. You're right you won't be able to max out the TSP right away. By the time you are an E-5 you will need a car so start saving in a sinking fund to pay cash for one. Unfortunately, in the current construct making rank is a crapshoot. The number #1 E5 at my command (works for me) has been unable to advance in the 3 years he has been ranked #1. Quotas, test scores, etc all create a crapshoot dynamic. I was enlisted for four years before I commissioned and never dealt with theft. If you want to advance quickly, get pro pay, and bonuses you should strongly consider going the Nuke route.
I was offered nuke, decided against it despite the $100k signing bonus and pressure from recruiters. Trigonometry, physics and school for more than 2 years, sounds like college work to me, even if it does pay more and advance faster, not my cup of tea and I would like to not have to deal with a meltdown if shit hits the fan and be irradiated to death, as safe as reactors are nowadays.

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Nords
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Re: Pre-Military Seeking Investment Planning

Post by Nords » Sat Jun 08, 2019 11:12 am

Dantheman221 wrote:
Sat Jun 01, 2019 8:56 pm
Wings5 wrote:
Sat Jun 01, 2019 8:53 pm
Look up Nords on the forum. Retired Navy O-5 4. He's got TONS of great advice.

Thanks for signing up! It's not hard to sack away a ton in the military if you can avoid the peer pressure and get by on the little that you'll find you need.
Thanks for the advice and yeah, I don't care much for peer pressure besides, honor, courage and commitment haha. The incentives and bonuses are something I plan to take advantage of heavily. Special pays and housing allowance are a big part of maximizing my income and investing strategy.

Edit: Oh wow, I didn't realize he was the author of that one book I started reading. That's quite the coincidence!
Well, I'm way late to this thread and Dan's probably busy with recruit training.

@DanTheMan221, when you regain a little more control over your life, let me know if you have any questions.

For those who keep track of these details, I'm a retired O-4. I screened "in excess" for submarine XO at the 12-year point, failed to select at two O-5 selection boards, and was continued on active duty as an O-4 to 20 years. It's all about the savings rate, not the paygrade.
* | * | Please see my profile. I don't read every post, so please PM or e-mail me to get my attention.

JTColton
Posts: 91
Joined: Wed Jun 20, 2018 7:41 pm

Re: Pre-Military Seeking Investment Planning

Post by JTColton » Sun Jun 09, 2019 10:28 am

Wanted to reply before OP went to basic but my internet went out, joys of being on a deployed ship. After 19.5 years in the Surface Combat Systems community I think he will be in for somewhat of a rude awakening.

Actionable:

- Start your TSP
- Open up a Vanguard Roth IRA and taxable account
- You get annual pay raises and bi-annual seniority raises, send these extra pays straight to your investments
- If when you deploy save as much of that money as you can
- Learn about opportunity cost, don't be afraid of debt, use it wisely. You'll have almost instant access to lower rates
- Lots of people with no discipline will peer pressure you into the lifestyle of wasting money on partying and other garbage, especially you being over 21 and able to buy alcohol. Just keep saving, stay in shape, become the best at your job. Find others who share this mindset.

Military advice:

- No issues with brokerage websites on ship access wise (I'm on Vanguard all the time), but you may or may not have any connectivity at all due to bandwidth restrictions, weather, satellite restrictions, etc. To paint a picture sometimes you are down to a <50 Mbps connection for a ship of 1000 people. With this in mind the lower rank you are the less computer and bandwidth access you have. Auto invest will save you here.

-If you're on sea duty you don't get BAH until you're an E5 or E4 over 4 years of service, but you might get a PPV based on availability which is just a fancy way of saying a barracks room. If you're overseas pretty much the same thing. In either case they can be a long way from the ship so you will most likely need a car. In fact my command wont even approve a barracks request if you don't have one.

- ET/FC is a big difference from CTI. I'm thinking you will go AECF/Tech Core and then branch out depending on how well you do up to that point. Making rank may be difficult. You should to E4 pretty easily/automatically but after that it's not for sure. I've seen my share of squared away Sailors that just don't have the numbers when its 5% advancement across the whole Navy.

- ETs work on radars and comms gear, you will be climbing the ship's masts and working in a room full of electronic gear. A/C is nice and cold.

- FCs work on electro-mechanical weapons systems and stand watch in CIC which is a dark room with no windows and a bunch of computers.

- CTIs work on intelligence products and stand watch in a JIC, cold a/c but another dark room with no windows. 12 on 12 off. Cool stuff though. This is the best route to go overseas because they are usually assigned to a central headquarters (NIOC) and deploy on detachments worldwide.

- For about 10 years now there is a policy in place called direct detailing which places people where the Navy needs them. Its a 50/50 shot whether you go where you want or even applied to go and just being sent somewhere. In a nutshell the Sailor has 0 say in where they go. You will be on a rotation. FC for example is 5 years of sea duty followed by 3 years of shore duty. You can not be forced to stay at sea unless you specifically request it.

- SDP is 10% annualized with monthly caps which are very easy to hit if you are maxing TSP and other investments, frankly not worth the PITA.

- If being an officer is what you want to do, bust your tail and be that #1 guy and try to get a commission through STA-21. You'll get paid while going to college then commission as an O-1E which is higher pay than a regular O-1. It make take a few years for you to become competitive enough for this program so we're still talking a 5-10 year or so process here no matter what just to get commissioned. If youre 23 now you might not have the time since there are age restrictions to be commissioned by depending on program. To make O-5 you're looking at 15-20 more. CWO you have to make Chief first so you're looking at 10-12 on average for that. LDO about the same.

- I don't know who you've been talking to about shore duty being despised, a tour on a DDG in Yoko may change your tune about a "boring" 9-5 with weekends off.

kelvan80
Posts: 107
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Re: Pre-Military Seeking Investment Planning

Post by kelvan80 » Tue Jun 11, 2019 6:49 am

Where are these people that despise shore duty? My husband has been on shore duty 4 of 16 years, but 2 of those he was an inspector at SEA so still gone for tti five months a year. Look hard at what a LT makes with 4 years of service vs where you would be enlisted. You would very quickly make up any time investedin a degree. However I would never considering the Navy if you want to get rich or for the pension. There are other ways and you might find yourself miserable. Service to country should be pinned of your top reasons.

Valuethinker
Posts: 38049
Joined: Fri May 11, 2007 11:07 am

Re: Pre-Military Seeking Investment Planning

Post by Valuethinker » Tue Jun 11, 2019 9:14 am

spooky105 wrote:
Sun Jun 02, 2019 12:05 am


As to the why...the portfolios are sound (developed by experts, etc.) and will be automatically re-balanced to maintain the asset allocation and retirement glidepath. Can you do better? Possibly. But you'll only know if another asset allocation was superior after the fact. Also, going with a different allocation will require more work on your end (periodic re-balancing) and open up the temptation to mess around too much (chasing returns, changing an under-performing allocation at the worst time, etc.). These will give you average returns with a reasonable risk/reward profile over your lifespan. This is a good thing.

Keep it simple. Keep it hands-off. Live your life.
Forces people are also away for months at a time in 24-7 situations. The mantra of all modern militaries (even probably the American one) is "do more, with less". They sweat their human assets. The USN flies planes that are older than their pilots. Airframes (can we speak of "seaframes"?) take a huge pounding both from shock stress and corrosion stress operating in maritime environments etc.

Bouncing around in a typhoon in the South Pacific is not the time to be worrying about asset allocation and rebalancing. At the risk of a bad pun, you want "fire and forget".

Bear markets probably coincide with national security emergencies ;-).

And remember, always, this advice which my late grandfather (Commander, RN) wrote in his book (I am lucky, I still have his replacement book of log tables, after he lost his first one in the abortive effort when his ship sank, trying to force the Dardanelles in 1915 and reach the Black Sea).
The business of the English Commander-in-Chief being first to bring an Enemy's Fleet to Battle, on the most advantageous terms to himself, (I mean that of laying his Ships close on board the Enemy, as expeditiously as possible;) and secondly, to continue them there, without separating, until the business is decided.
-- Horatio, Lord Nelson, Plan of Attack (1805, before Trafalgar)

Ever hear a clearer Corporate Mission Statement?

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