If you look around your platoon, you may see a bunch of young, motivated Soldiers. Perhaps you see rough, lethal warfighters. Maybe you notice a couple gruff, hard-charging squad leaders ready to train and inspire troops.
But, as I move about my unit's area of operations, I see more than Americans brave enough to don camouflage uniforms. I see a bunch of future millionaires.
You read that right.
All of you may be starting from a different place financially, and it may be hard to believe, but it's possible that -- one day -- each and every one of you could become millionaires.
There are a number of roads to become financially wealthy: you could start and build a business; you could win the lottery or sue the brakes off somebody; and you could sharpen your gold-digging acumen and marry well.
Or, you can take the road most traveled: you can work a job you enjoy, save hard and invest well. According to Thomas Stanley, who wrote The Millionaire Next Door: The Surprising Secrets of America's Wealthy, only about 20 percent of millionaires inherited their money. The other 80 percent are self-made millionaires who worked for their money and invested it wisely. They're regular people like you and me, but they made the decision to save consistently and invest those savings to generate wealth. They're not special. They simply made the choice to plan and win financially, and I want to encourage you to do the same.
THRIFT SAVINGS PLAN
Soldiers hoping to experience long-term financial wellbeing should be aware of the opportunity and benefits presented by the Thrift Savings Plan -- or TSP.
Briefly, the TSP offers flexibility, simplicity and an opportunity to build real wealth.
The TSP program allows you to control and change your investment strategy and decisions to fit your life and evolving financial goals and objectives, and the plan is available to you whether you've decided to remain in the legacy retirement system or you will be moving forward in the new Blended Retirement System.
Investing your money through the TSP, updating contributions and changing your investment allocations can be done quickly and easily.
Finally, you have an opportunity to build real wealth and long-term financial wellbeing by taking advantage of the TSP and all its benefits.
FLEXIBILITY
The TSP program allows you to control and change your investment strategy and decisions to fit your personal situation.
Do you plan to only complete your initial enlistment, or have you decided to make a career out of the military? Are you young enough to take more risks in search of bigger investment returns, or are you nearing retirement and preparing to live off of your investment income soon? Have you opted to stay in the legacy retirement system or are you in the new Blended Retirement System? In each situation, you can tailor investment decisions in the TSP in a way that will make sense for you.
TSP's own investment strategy webpage notes that you can maximize your retirement savings by choosing the strategy, funds and tax treatments that are right for you.
For instance, through the TSP, you can choose two different tax treatments for your investments: a traditional TSP or a Roth TSP. If you want all of the earnings that your investments make to be tax-free when you withdraw the money, you should consider investing in a Roth.
TSP also notes that, as members of the armed forces, we're able to make contributions to the program from tax-exempt pay. That means by choosing to invest through a Roth TSP, you could potentially avoid paying upfront taxes on part of your earnings, those earnings could grow tax-free in investment funds, and -- in retirement -- those same earnings could be withdrawn tax-free!
SIMPLICITY
Making adjustments to your investment amounts and investing strategy can be done quickly and easily with just a few clicks of a mouse.
Through the main menu in myPay, you can easily start, stop or change your TSP contributions.
If you get a pay raise and want to start investing a little more each month, simply jump on myPay, and increase the percentage of your paycheck that you would like to invest.
Making changes to the funds that you are invested in is quite simple too.
As Forbes.com recently reported, TSP offers participants a selection of five main investment funds and several lifecycle funds, which are made up of a combination of the five main funds. While that may be far fewer investment options than you'd find with the average employer's 401(k) program, the small number of options can be less confusing and it eliminates large investment fees! I encourage you to spend some time reading a little about each fund at TSP.gov, where they give a breakdown of the investment objectives, earnings components, and risk profiles of each of the TSP funds.
Also on TSP.gov, you can log into your personal TSP account and make updates to where your money is invested. Perhaps you're feeling bullish, or positive, about the direction of the global economy. In that case, you may want to move some of your money to the I Fund, where your dollars will be invested in international stocks from more than 20 developed countries around the world.
WEALTH
Finally, the most exciting reason to participate in the Thrift Savings Plan: by taking advantage of the TSP, you have a real opportunity to invest and grow your money, and -- over time -- compound interest can make you rich.
Like the average millionaire with a good financial plan, little by little, you can build wealth, and contributing to your TSP can be one part of your overall roadmap to retirement.
TSP's fund performance page currently reports that the C Fund has had an average annual return of 10.01 percent since the fund was formed January 29, 1988. The compound interest calculator at Investor.gov will tell you that just $400 per month, invested at 10.01 percent from age 20 to age 55, will add up to over $1 million. In fact, you'd have about $1,525,000. Increase those monthly contributions to $550, and you'd have over $2 million!
That's right. Through investing platforms like the Thrift Savings Plan, it's possible to build real wealth and even become a millionaire!
While there are inherent risks in investing your money, and no investment returns are guaranteed, most of the world's wealthiest people -- and most of the world's wealthiest Soldiers, for that matter -- earned their wealth through consistent and wise investing.
If you are hoping to experience long-term financial wellbeing, you should be aware of the opportunity and many benefits that contributing to the TSP might offer, including flexibility, simplicity and an opportunity to build real wealth.
I want to encourage all Soldiers to consider working toward becoming military millionaires! Uncle Sam makes sure you get a paycheck for all your sacrifices and hard work, but it's up to you to also save hard and invest your money.
As you plan and make decisions about your finances and future, don't be afraid to reach out to personal financial management counselors with questions. The Department of Defense offers a number of financial counseling options for you and your family to help plan and control your financial future. Service members can access financial counseling for free through installation programs and Military OneSource at www.militaryonesource.mil.
Happy investing!
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One of the most wide-reaching and significant changes to military pay and benefits over the last 70 years went into effect Jan. 1, 2019, with the implementation of the Uniformed Services Blended Retirement System, known as BRS.
The new system blends aspects of the traditional defined benefit retirement pension system with a defined contribution system of automatic and matching government contributions through the TSP.
All new entrants into the uniformed services will now be enrolled in this new retirement system, which provides retirement savings benefits for the majority of service members, including those who serve fewer than 20 years.
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This commentary should not be considered investment advice. It contains the opinion of the author and is meant for informative and entertainment purposes only. With regard to the performance of Thrift Savings Plan funds, past results may not be indicative of future performance. As with any investment, there is risk of loss of principal when funds are invested in the TSP. This commentary does not constitute an offer or solicitation, on behalf of the TSP, to invest in its funds. You must meet certain eligibility requirements, such as being a member of the armed forces or working as a federal employee, in order to participate in the TSP.
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References:
Annual Returns. (n.d.). Retrieved Februay 5, 2019, from https://www.tsp.gov/InvestmentFunds/FundPerformance/annualReturns.html.
Compound Interest Calculator. (n.d.). Retrieved April 5, 2019, from https://www.investor.gov/additional-resources/free-financialplanning-tools/compound-interest-calculator.
Fund Management. (n.d.). Retrieved Februay 5, 2019, from https://www.tsp.gov/InvestmentFunds/FundsOverview.
Horrell, K. (2015, January 05). How To Update Your TSP Elections. Retrieved Februay 5, 2019, from https://www.military.com/paycheckchronicles/2015/01/05/update-tsp-elections.
Maximize Your Retirement Savings: Tax Advantages. (n.d.). Retrieved Februay 5, 2019, from https://www.tsp.gov/PlanningTools/InvestmentStrategy/retirementsavings/taxAdvantages.html.
Stanley, T. J., & Danko, W. D. (2000). The millionaire next door: The surprising secrets of Americas wealthy. New York: Pocket Books. doi: https://www.investopedia.com/financial-edge/0810/7-millionaire-myths.aspx.
Storjohann, M. B. (2018, January 11). What You Don't Know (But Should) About Your TSP. Retrieved April Februay 5, 2019, from https:// www.forbes.com/sites/marybethstorjohann/2018/01/09/what-you-dont-know-but-should-about-your-thrift-savings-plan-tsp/.
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