For any military personnel, saving and investing deployment money is one of the surest strategies to secure their future and possibly lead them into early retirement. Additionally, the excellent benefits you receive as a military member during deployment makes it the perfect time to consider investments.
Unfortunately, there is little time to pay attention to finances due to a couple of challenges, including frequent transfers that don't give you much time to focus on personal finances. Although you may make a financial decision along the way, there is that insecure feeling due to the many options available, from stocks, mortgages, and insurance products, to mutual funds. It is hard to choose the best, and you might end up overlooking a good investment. This piece highlights the best investments option that military service members should consider.
1. Roth IRA
Set up of a Roth IRA has always been a great financial option. But it best suits military personnel due to the tax-free combat-zone pay. All contributions, together with certain withdrawals to the IRA, are tax-free according to the current laws. It is a great way to save cash and also allows you to invest in an extensive range of securities.
This individual retirement account provides a valuable future tax break. It is similar to a traditional IRA or a 401k but differs in that you put cash into the account after paying taxes on it, but as you start to take the money out, it will be tax-free. Even the money that accrues in the Roth IRA is not subject to taxation as you take it.
2. Thrift Savings Plan (TSP)
The Roth TSP is another great investment option to consider for your deployment money. You are subject to taxation on a ROTH during the investment and pay nothing as you take out in the normal situation. But while on deployment in a tax-free zone, you are free from taxation. Your money grows without taxation, which means that you end up with a good amount at the end.
It gives the military service members a 1% of the base pay they contribute to a Thrift Savings Plan. Additionally, you can contribute an additional 4% to earn a 5% total match. The expense ratios are extremely low, whereby you pay around 40 cents for every investment of $1,000. This plan is great when you are looking to benefit from the matching contribution and low expenses it offers. However, ensure you employ other customized investment strategies too.
3. Pay Your Debt
Another way to invest your deployment money is to get out of debt. It does not seem like an investment, but it is. The cash refund on money received after every debt payment equals the debt's interest rate.
Let's say you have a 16% debt balance, and you pay an additional $100 on it. You get 16 percent. Why? Because failing to pay 16% means that you have an additional 16% in your hand. If you fail to make a couple of payments in time and you end up with a penalty of 24%, paying an additional $100 gives you a 24% return.
There are programs set to assist military service members in getting out of debt. You can take it as a perception by the Financial Industry Regulatory Authority that military personnel finds themselves in debt more than civilians on average. You benefit from a cap on interest rates for any debt that you had before your active service in the military.
4. Military Savings Deposit Program (SDP)
Military Savings Deposit Program is another great investment option. Military service members can put part or all of their unallotted pay into a (Department of Defense) DOD savings account up to $10,000 during deployment. It compounds quarterly at 10% per annum. With this program, you get taxed on earnings.
You must get hostile fire pay for at least 30 consecutive days or one day in three consecutive months for eligibility. Once you leave the combat zone that makes you eligible for the program, there is the closure of your account and money refunded by direct deposit after 120 days. However, you can withdraw the funds earlier if the need arises.
Final Thoughts
Deployment offers military personnel a great opportunity for a debt-free life, strong saving habits, and financial freedom. Now that you are conversant with investment options for your deployment money, you can commence your journey to financial success.