Untitled Thread

Congrats on your son choosing to serve his country and I wish him all the success in his future military life. I joined the military (reserves) between my junior year of high school and senior year of high school. I "saved" every dollar I earned at Basic Training during the summer between my Junior and Senior year. And I saved every dollar between my senior year and freshman year of college. It is possible to live very frugally as a junior enlisted soldier. So, while I saved nearly every dollar I earned while at Basic Training and Advanced Individual Training (AIT), I spent it on college tuition. After graduation, I entered active military service and retired 27 years later. Here is what I wish I knew back when I was 17 years old, that I know now.

1. Saving is not investing. In ChooseFI, when folks talk about a "Savings Rate", it really should be your "Long Term Investing" Rate. Savings does not always equal investments. Sometimes Savings is just that savings for a bigger expense sometime in the future. That type of savings should not count in one's "Savings Rate", so for the rest of this post I will call it an "investment rate"

2. 20% as an Investment Rate (or savings rate) is a good start point. But really, as an E-3 going in he can save at a much higher rate while going through Basic Training and Advanced Individual Training, assuming he only needs to take care of himself and no one else. He won't be able to start immediately into TSP until he has served 60 days in service. But once he has hit that time, he'll want to automate his contribution into TSP as soon as possible. While he is at Basic Training and AIT, he might be able to "save" as much as 90 or 95% of his pay. But once he is at a real unit, he will want to adjust that down. JL Collins would recommend he attempt to invest at a 50% rate. If he sets his investment rate high early on, as pay raises come in, it will be easier to maintain that rate.

3. Military retirement is calculated based on your "base pay" not your full pay. For enlisted ranks the additional pay on top of your military base case can be significant. In some cases it might double his pay. So retiring on 40% base pay will be much lower than what your son actually receives as full pay and allowances.

4. The % of income your son should put in TSP should be an informed decision. Here is a website to a calculator that will help your son decide what investment rate (savings rate) he wants to put into his TSP account. Link to the calculator: S.E.M. Calculator -

5. The calculator is focused on defining what savings rate a person needs to achieve Financial Freedom (Invesment Income > expenses) or Financial Independence (Investment Income > salary). For example the calculator defaults show that a 20% investment rate, with 2% inflation, will take a person 36 years before his Investment Income would be greater than or equal to his expenses. If your son upped his investment rate to 40%, by the time he hit his 20 year mark his TSP alone would almost cover his expenses (it would actually take till his 21st year). If your son were to achieve this, His TSP plus BRS would be a better retirement than the "old" system.

I hope the above information helps. Money doesn't need to complicated. Especially for military members. You only need to follow 4 simple rules, which you can find at: Simpli-FI.money

• Spend less than you earn. Live intentionally, avoid lifestyle creep, and focus on what truly matters.
• Invest the rest. Immediately invest the difference into low-cost index funds, automate the process, let compounding do the heavy lifting.
• Avoid debt. Don’t let credit cards, car loans, or oversized mortgages hold you back, choose wisely, live below your means.
• Give it time. With patience and consistency, decades of compounding will set you free.

Tell your son I wish him good luck and Thank you for his service.

COACH HOLDREN

In addition to the advice so far, @azar5065, he should make sure that at least 5% of his base pay is going into the TSP for the Dept of Defense match from the Blended Retirement System. (This is the default, but he needs to make sure it's happening.) His TSP account should be started after 60 days of service and his matching DoD BRS contributions will start on his 25th month of service.

Military compensation is so lightly taxed (compared to civilian compensation) that he should contribute to his Roth TSP and his Roth IRA... no traditional contributions are necessary from a tax perspective. This tax issue is so significant that he should keep up this habit until he reaches the ranks of E-7 or O-4.

The TSP's default investment is the longest-dated target retirement fund. If he wants to be more aggressive then he could invest in the C&S funds. If he wants to be very aggressive then he could invest in the I fund, which is one of the few TSP funds with lower expenses than most international index funds.

After he's set up these financial basics, he could check library copies of "The Military Guide To Financial Independence and Retirement", ChooseFI podcasts with military guests, and Spencer Reese's MilitaryMoneyManual podcast. However it's far more important that he get qualified and keep earning those promotions.

If he's told that he's a great candidate for submarine service then we should talk. You're both also welcome to contact me here (or e-mail NordsNords at Gmail) if you have more questions about anything military or personal finance.

First off, it sounds like things are going well for him! Wishing him all the best, and I am very grateful for your family's service. I can only say what I would do, but it really should be his decision looking at his goals and plans. With that caveat I'd personally make sure all my consumer debt is paid down, I have a 3-6 month emergency fund saved in a HYSA, continuing to max the Roth IRA and investing the remainder, as much as I reasonably am willing to, leaving a little bit of buffer after expenses for, into the pre-tax TSP. At that age I would invest 100% into the total US stock market via a low cost ETF. These funds follow the S&P, VTI is a popular one widely available, but every brokerage has their own version that is pretty much the same. Ask him to pick up a compound interest FIRE calculator and punch in his own numbers-- he will have an eye opening experience seeing his future wealth if he stays the course. Just my opinion! Food for thought!