Investing Options for Veterans and Military Members

Investing Options for Veterans and Military Members

May 16, 2024

Veterans and military members have access to various investment options, some of which are not offered to the general population. Managing investments depends on individual goals, risk tolerance, and financial situation. Here are some investment options for veterans and military members to consider.

Thrift Savings Plan (TSP)

A TSP is a retirement savings and investment plan for federal employees, including military members. It offers a variety of investment funds to consider, including stock and bond funds, with low fund management fees. Contributions to a TSP may be made through self-selected payroll deductions.

Individual Retirement Account (IRA)

Traditional and Roth IRAs are retirement savings options for veterans and military members. Contributions to traditional IRAs are generally tax-deductible, while withdrawals in retirement are taxed as income. Roth IRA contributions are not tax-deductible, while qualified withdrawals in retirement are tax-free.

Stocks and Bonds

Investing in individual stocks and bonds may give veterans and military members an opportunity for capital appreciation and income generation.

Mutual Funds and Exchange-Traded Funds (ETFs)

The investment options offer diversification by pooling money from multiple investors to invest in a portfolio of stocks, bonds, or other assets. Mutual funds and ETFs are managed actively or passively and provide investors access to various markets and sectors.

Annuities

Annuities are insurance products that may provide a guaranteed income stream in retirement, like a pension. They are useful for creating a steady income source; however, it is important to understand the terms and fees associated with them to ensure they are appropriate for your situation.

Education Savings Accounts (ESA) or 529 Savings Account

For veterans and military members with children, ESAs and 529s are ways to save for their children's education expenses. ESA contributions are not tax-deductible, but qualified withdrawals are tax-free when used to pay for education-related expenses. Some states also provide tax credits for 529 contributions.

Health Savings Accounts (HSA)

If eligible, military members may contribute to an HSA, which offers tax advantages when funds are spent on medical expenses. Like IRAs and TSPs, HSA funds may be invested, letting these funds enjoy exposure to the overall market.

Employer-Sponsored Retirement Plans

Apart from a TSP, some veterans and military members may have access to 401(k) or similar retirement plans through a civilian job. Taking advantage of employer matches and contributions helps boost retirement savings.

Certificates of Deposit (CDs)

CDs are low-risk investments banks offer with fixed interest rates and maturity dates. They might be an option for those seeking a predictable return on their investment. In an era of rising interest rates, they may provide a competitive rate of return.

Before making any investment decisions, it is important to assess your financial goals. Determining your risk tolerance and having adequate investment knowledge would be helpful. Consulting with a financial professional might help provide personalized guidance based on individual circumstances and goals. Additionally, veterans or current military members should consider any special economic benefits or challenges they may face as a result of their service.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Withdrawals prior to age 59 ½ in a Traditional IRA may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.

Investing in mutual funds involves risk, including possible loss of principal.  The funds value will fluctuate with market conditions and may not achieve its investment objective. Upon redemption, the value of fund shares may be worth more or less than their original cost.

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

An Annuity is a financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

CD’s are FDIC Insured and offer a fixed rate of return if held to maturity.

This article was prepared by WriterAccess.

LPL Tracking #1-05377994