Military retirement used to be simple: After 20 years, your pension would be 2.5 percent multiplied by the number of years served and the average of your highest 36 months of pay. Everyone would get to tack on an adjustment for inflation. Some of the old timers would get a readjustment at age 62. Times have changed.
Troops coming in now get the new “blended system,” which has some significant differences. The pension is only half of the service member’s base pay. The other half goes into a 401(k)-style fund, which is now susceptible to the stock market. I don’t know if you’ve been paying attention to the market the last couple of years, but that’s not exactly guaranteed money.
“Put MY retirement on 2 and 14! Daddy needs a new life after the military.”
The biggest deal is that everyone can get a piece of retirement pie no matter how long they’re in. And I’m not going to tell you whether you should opt-in if you have the choice. But if you do opt-in, make sure you make the most of the DoD’s matching funds.
If you want to take a stab at future planning for yourself, it’s worth the investment to take matters into your own hands. The downside is that you might have less in your paycheck for drinking at the barracks every other week. Your co-workers may harass you for being broke all the time. They might even call you a wuss for doing something sensible with your money — but would they say that to Tony Robbins?
Tony Robbins eats small people like your co-workers for breakfast. Then dips into an ice-cold pool. That’s how millionaires start their day.
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 more 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 the ton of hidden fees you pay to a broker aren’t paid to Wealthfront. The app is a heavily-regulated fiduciary, and manages your portfolio for .25 percent of its overall value. Also, your first $10,000 is managed for free.
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 $100 into Robinhood, you get $100 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 and getting 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 small piece of cryptocurrencies on Robinhood without having to shell out $16,000-plus for a full bitcoin. If you can find the stock symbol, chances are you can buy it on Robinhood.
3. Acorns
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 $1.75 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 $200 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 – $73.90/share) or “Delicious Dividends,” actually the Schwab US Dividend Equity ETF (ticker: SCHD – $49.35), 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 $25 investment when the price tumbles to $60 after they kill someone’s dog, beat up another passenger, or lord knows what else they could come up with.
This article originally appeared on We Are The Mighty
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