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How To Start Investing While In The Military

While you get posted on deployment, you can access additional income benefits and investment vehicles that civilians don’t receive. You’re in the perfect position to start investing!

Naturally, weighing the volume options available can be confusing and hard to understand – especially when you want to know you’re making the best decisions for your financial future. With tax-free pay, hazardous environment pay, family separation pay, and imminent danger pay among others there’s plenty of space to put your money to good use. 

Although monetary incentives do not alleviate the frustration of separation from your family in a dangerous environment, they do fast-track your financial freedom. This article will expand upon the various options available to military personnel and address how to start investing while in the military.

Military Pension: A Thing Of The Past?

In the past, the military used a pension model called the uniformed services retirement system, or the legacy system. It basically denoted that members would be eligible to receive a pension after 20 years of service in the military.

The problem was that not all military members remained active during the required 20-year period. As a result, up to 81% of members missed their opportunity to receive the military pension. In a bid to improve the financial prospects of military personnel, the U.S. Defense Force introduced what we call the blended retirement system (BRS) in 2006.

Blended Retirement System

Any member joining the military between 2006 and January 1st, 2018, could choose between the legacy system and the newly introduced blended retirement system. All members joining after January 1st, 2018, are automatically enrolled in the BRS. The new model comprises three integrated components:

  • Federal Thrift Savings Plan (discussed below)
  • Continuation Pay – Continuation pay is a direct cash payout targeted at mid-career servicemen. The bonus is payable between eight and eleven completed years of service. All Active Duty, National Guard, and Reserve Service members enrolled in the BRS will receive continuation pay on the agreement to undertake an additional service obligation. The timing of eligibility and the amount is derived from your position in the military.
  • Annuity – Receiving a monthly annuity is similar to the legacy system, though it gets calculated differently. Simply put, your annuity payment is calculated by:

2% x Years Of Service x High 3.

High 3 is the term used to describe the average basic salary of your three highest-paid years in the military.

Federal Thrift Savings Plan (TSP)

The Thrift Savings Plan is a federal retirement plan, similar to the 401(k) that offers an inexpensive way for service members and federal employees to save for retirement. The employee (service members) and the employer (U.S Department of Defense) both make contributions to this plan, then employees take it with them upon exiting the military.

Members are eligible for tax advantages and can select their combination of investments. The options include U.S. Treasury Bonds, index funds, and lifecycle funds. Participants have the choice between two tax categories for their TSP contributions:

  • Traditional TSP – When you invest in a Traditional TSP, your pre-taxed income goes directly into an account. You must pay regular income taxes when you withdraw funds at retirement.
  • Roth TSP – With a Roth TSP, you receive no tax benefits when you initially invest your funds. Money going into the account gets taxed like any other income, then all withdrawals at retirement are tax-free.


In 2022, you can add up to $26,000 to your TSP contributions. This changes slightly for those over age 50, who have contribution limits up to $27,000 annually. Military personnel taking part in the blended retirement system can take advantage of up to 5% additional contributions from their employer.

The military matches your contributions dollar-for-dollar on the first 3% of the sum you contribute to the TSP. They then match 50 cents on the dollar up for the next 2%, earning military members an additional 5% of free money.

Real Estate Investment

Passive real estate investments yield high returns without the hard work!

Real estate is a popular way for military members to diversify their portfolios and carries the potential for higher returns. Some strategies take more effort and involve greater risk than a savings deposit program or retirement account.

The benefits of real estate investments include diversification, tax benefits, and receiving residual income while gaining equity in an appreciating asset.

Rental Property

Many service members purchase an investment property and rent it out to tenants for residual cash flow. Notably, this makes you a landlord and requires you to manage the property, including regular maintenance and repairs. For this reason, many servicemen purchase properties close to the base to facilitate management responsibilities.

Rental properties entail higher upfront and ongoing costs and carry greater risk than many other investment options. While the returns and leverage may be worth it for some, it’s wise to ensure vigilant planning if you go down this road.

Professional Syndication

If you have a nest egg saved for the right investment strategy and are looking for high returns without the landlord hassles, investing in professional syndication is a happy medium between the two.

Professional investors crowdsource capital to undertake lucrative real estate deals in income-producing multifamily and commercial real estate. Investors gain equity in the properties they invest in, receiving residual income, tax benefits, and reduced risk to their portfolios. What’s better is that professional syndication is an entirely passive investment.

Pinto Capital Investments offers syndicated investment deals for military members who want to yield real estate’s high-profit margin but don’t want to lose time managing properties. If you to take advantage of a high-return, low-risk, hassle-free real estate investment, contact Pinto Capital Investments today.

Real Estate Investment Trusts

Real estate investment trusts are another way to passively invest in real estate. REITs also own, operate, and finance income-producing properties, and it’s relatively easy to get started. Investors need to open a taxable brokerage account and then buy shares in publically traded REITs.

REITs have lower risk, though usually do not front up as high returns as a rental property or partaking in professional syndication.

Military Savings Deposit Program

Earn great returns in the military savings deposit program.

By participating in the savings deposit program (SDP) military personnel serving in a designated combat zone can get 10% annual returns guaranteed on deposited amounts up to $10,000.

Those eligible must be receiving hostile fire pay and can begin collecting after being deployed for 30 consecutive days in one month, or at least one day per month over three months. You can continue racking up 10% interest for up to 90 days after returning from the combat zone.

The SDP entails certain limitations when it comes to accessing your funds. You must fill out a 1099-INT form when you take your money, meaning you most likely won’t be eligible for tax-free withdrawals.

Individual Retirement Account (IRA)

Even if you are contributing a maximum to your thrift savings plan, nothing inhibits you from storing away some extra cash in an IRA account. Regularly contributing to both funds is a complementary savings strategy and will help ensure a stable retirement.

The contribution limits of IRA’s are much lower than TSP caps. In 2022, you can deposit up to $6,000 into your IRA account, which leaps to $7,000 if you’re over 50. With that said, IRA accounts have greater flexibility than TSPs due to the variety of investment choices on offer.

Roth IRA or Traditional IRA?

Like TSPs, you get a choice between Roth IRA (after-tax contributions) and Traditional IRA (pre-tax contributions). For your Roth account, you invest your taxable income and can make tax-free withdrawals on your retirement income. Otherwise, a traditional IRA allows you to grow tax-free contributions and pay taxes on the amount withdrawn in your retirement.

A rule of thumb is that a Roth IRA makes more sense if you expect to have a higher income in retirement than you currently do. If it’s more likely that your income and tax bracket will be lower in retirement than it is now, a traditional IRA may be strategic. With that in mind, it’s critical to consider the overall picture of your investment portfolio when you make your decision. The defense’s financial readiness network will be able to offer guidance about your investment options if you feel you need further counsel.

Withdrawal Rules

The nature of the two accounts is designed to deliver different benefits at different stages to investors. Accordingly, the rules for accessing your money vary between the two options. Here is a breakdown of what you can expect:

Roth IRA

Although a Roth IRA account will not offer tax-free contributions, you can receive tax-free distributions after you turn 59 1/2. Plus, unlike TSP accounts, you’re not required to take mandatory distributions after you turn 72.

You can expect any earnings withdrawn before 59 1/2 to be taxed by the IRS with an additional 10% penalty fee. These penalties do not apply to your contributions since you have already paid tax on that money. Only after you have taken your maximum contributions before 59 1/2 will you be penalized.

Traditional IRA

If you choose to invest in a Traditional IRA account, all withdrawals taken before age 59 1/2 will incur a 10% early withdrawal penalty in addition to your standard income tax. Both contributions and earnings are penalized if taken early. In addition, you must receive minimum distributions from your traditional account from the age of 72.

This means that if you need to access some or all of your funds early, a Roth may be a better idea. Alternatively, if you’re looking for extra motivation to leave your accounts untouched for retirement, a Traditional IRA might support this objective.

529 College Savings Plan

Start planning for your children's tuition early.

Retirement is not the only reason we choose to invest our money. If you have children (or are planning to), opening up a 529 college savings account can offer tax advantages and help you get financially prepared for their tuition fees.

Traditionally, the college savings plan was used to fund tertiary and other post-secondary education. Though laws passed in 2017 stipulate that these funds can now support children’s k-12 education. These plans are administered at a state level rather than a federal level, so the tax break will vary across states. Over 30 states offer full or partial tax deductions. There are two options for approaching the 529 savings plan:

Savings and Investment Accounts

When investing in savings accounts, you are expected to pay taxes on contributions and can withdraw them tax-free. However, your funds must be used to pay for a refined list of eligible expenses, such as tuition, textbooks, and accommodation costs. The type of investment options vary from state to state: some offer more variety than others.

Paid Tuition

For this option, your child’s education is paid for well in advance of them graduating. You can access their education more affordably, though your child must attend a state-funded school in the area. If your child decides to study in a different state, you must pay the difference in tuition expenses.

There is usually one beneficiary when you open the account. However, if the beneficiary was granted a scholarship, it’s possible to use the funds for a younger child’s education instead.

Military Investing Tips

It’s beneficial to fully understand all the investment options made available as you begin tracking your way to financial freedom during retirement. However, there are a few tips to keep in mind that may make your investing experience more fruitful, simple, and productive.

Use The Defense’s Financial Readiness Network

The financial readiness network offers resources and education to support financial readiness, no matter what stage you’re at. You can make an appointment with professional advisors who will discuss the preparation, planning, and management of your investment opportunities while you are in the military. So, if you’re unsure how to move forward, you may find the financial readiness network helpful.

Consider Your Risk Tolerance

Every investment carries some degree of risk. When you start investing, it’s a good idea to consider your risk tolerance, so you can make smart financial choices about reaching your goals. A few things that may affect your risk tolerance are:

  • Your investment term
  • Your financial goals
  • Your current financial situation

As a general rule, the longer you invest, the better returns you receive. If you have 30+ years in your investment term (before retirement, for example), you can usually take more risks than someone two years away since you have more time to bounce back from potential loss.

Investments that entail greater risk typically have the potential for better returns. Conservative investments come with a low-risk factor and focus on capital preservation rather than high returns.

Start Investing Early

This seems to be the golden nugget of investing advice: the earlier you start investing, the better returns you’re likely to receive. This is because the interest and returns you earn on your investments work cumulatively: the more you have invested, the more you earn on them.

Early investing can also help you develop good investing habits while you’re young, which can set you up for life. With that said, if you haven’t started investing for your future, it’s never too late to start!


Spreading your eggs around a few baskets – or diversifying your investment portfolio – is one of the best ways to protect your money from risk. This is because different asset classes are not affected the same way when financial fluctuations occur. For example, let’s say you invest in mutual funds and real estate. If your funds undergo volatility from the stock market, your real assets will not be affected in the same way, which significantly lowers the overall risk of your profile.

Final Thoughts

Entering a career in the military opens a whole new set of opportunities to begin investing for your future. Suddenly, there are a plethora of options at your fingertips that civilians don’t have access to.

You work hard for these opportunities, so it makes sense to use them wisely. Now that you have read and understood how to start investing while in the military, it should be easier to define your goals and narrow down your investment path moving forward.

When it comes to investing, diversifying is critical. In addition to your TSP or IRA, adding real estate assets to your portfolio can provide long-term protection for your portfolio. Passive syndicate investments will generate higher average returns than a retirement account and carry significantly lower risk than other forms of real estate investing. Ex-military professional investors Pinto Capital has designed a passive strategy specifically for military personnel. If you want to take advantage of a high-yield, low-risk, and hands-off investment, contact Pinto Capital Investments today.

Anthony Pinto
Anthony Pinto
Anthony Pinto is the founder and CEO of Pinto Capital Investments (PCI), a real estate investment firm focused on acquiring affordable and workforce multifamily properties and apartment buildings through syndications. Since 2019, PCI has gone full cycle on 2 large apartment complexes (+100 units) with an IRR in excess of 85%.