Military retirement used to be simple – well, simple as far as compound interest math might go. After 20 years, your pension was multiplied by the number of years served + your highest 36 months of pay x 2.5 percent.
That helped keep all retirement accounts on track with inflation. There was even a readjustment at age 62. Times sure have changed.
Service members don’t have to do that complex maths but they definitely get a different kind of retirement. Today’s troops coming in are part of a blended retirement system. There are some key differences between this blended system and what the old-timers used to get. Now, the pension is just half of a service member’s base pay. The other half gets funneled to a 401k-type fund. That fund is subject to the stock market. In case you haven’t been paying attention to the stock market lately, let’s just say that anything on the market isn’t exactly guaranteed.
Here’s what good about this blended system. Everyone gets a piece of the pie. It doesn’t matter if you’re in for 5 or in for 25, you’re going to get something this retirement plan. We’re not going to say whether or not you should opt-in, but if you do, make sure you make the most of it. Check out the DoD match funds plan.
Take the future into your own hands
Now, if you’re like some of us and want to take matters into your own hands – that’s great! There are lots of ways you can take ownership of your retirement plan. Planning for your future is important. But you should be prepared to take some flak from your buddies. That’s the downside. You might have a little less money for drinks every weekend. And maybe your coworkers harass you from time to time about being “broke.” They might even call you a wuss for doing something sensible with your money — but would they say that to Tony Robbins? We think not. Luckily, technology brings us the ability to take the mystery out of buying stocks, trading stocks, setting up an IRA, and more.
Even though these apps make it easy to invest from your smartphone, the old adages are still in effect: start saving as soon as possible. Be aggressive early in life, take risks. As you get older, move your investments toward safer, more stable bonds. Reinvest your dividends. Take advantage of compound interest.
Just make sure you do your research before investing in anything, anywhere, anytime.
1. Wealthfront
Wealthfront is a traditional-style way to invest. It gives you standard financial products while giving you the ability to set up automatic deposits from your smartphone. Traditional retirement accounts, IRAs, and Roth IRAs are just a few services it offers. Everything is delivered to your account electronically and you can even see what your financial future could look like based on how much you’re adding every month.
It automatically performs regular tax-loss harvesting, dividend reinvestment, and account rebalancing to keep you on track.
The difference between Wealthfront and a normal broker is that you don’t have to pay fees. The app is a heavily-regulated fiduciary and manages your portfolio for .25 percent of its overall value.
2. Robinhood
When you’re buying stocks through a broker (and most brokerage apps), they charge you a number of fees, including transaction fees and broker fees. Not Robinhood. Every time you put money into Robinhood, you get money to buy stock.
Putting back a few bucks every month to play around on the stock market will help introduce you to learning the market. Plus, it’ll help you get a feel for buying and selling stocks. Best of all, after a while, the numbers add up and you can go from trading high-volatility companies to buying Coke and Starbucks in a matter of months with some simple investments and patience.
You can even get a small piece of cryptocurrencies on Robinhood without having to shell out lots of money for a full bitcoin. If you can find the stock symbol, chances are you can buy it on Robinhood.
3. Acorn
This is a simple app that every young person should probably have. All you do when you sign up is set the level of risk you’re willing to take (a very traditional decision for retirement investing) and the app does the rest. You attach your bank account and Acorns rounds up every transaction and invests it for you.
That Coca-Cola you bought just put a quarter toward retirement. The 75-cent Pabst Blue Ribbon you got at the bar? There’s another quarter. It doesn’t sound like a lot at once, but imagine every purchase over your pre-retirement lifetime throwing a few quarters in.
You can even throw some additional money in every week or so to boost your potential.
4. Stash
Stash started as an app that gave small-time investors access to big-money Exchange-Traded Funds, like Warren Buffett’s Berkshire Hathaway investing. No one in the military is going to be able to afford a regular buy of 0 of Buffett, but with Stash, you can buy a small piece of Berkshire-Hathaway and “Roll with Buffett,” as they say.
Using simple descriptors, like “Global Citizen,” which is actually the Vanguard Total World Stock ETF (ticker: VT – .90/share) or “Delicious Dividends,” actually the Schwab US Dividend Equity ETF (ticker: SCHD – .35), smaller investors can get access to these expensive funds that are traded like stocks. It’s a great introduction to ETFs.
5. Stockpile
Stockpile is another brokerage app, but this one is for the small-time or new day trader. It does charge fees for transactions, unlike Robinhood, but Stockpile’s brilliance is that you can buy stock in blue-chip companies without having to buy a whole share.
When you see a stock like United Airlines take a tumble for its latest snafu, you can be reasonably sure the stock will likely recover. You can take advantage of that pattern by “buying the dip.” You can purchase a larger part of the stock for your weekly investment when the price tumbles to after they kill someone’s dog, beat up another passenger, or lord knows what else they could come up with.
