Here I Stand

Here I Stand

Wednesday, October 13, 2010

Deployment Investments

My old battalion is about to deploy again – this time to Afghanistan, and one of the things that I wanted to touch on today was finances and investments while overseas. I know a lot of the people who read this are military, or at least former military, and not many of those of us in uniform get much training on what to do with our money. Many of the men I served with used their combat pay to buy a new Mustang, which they subsequently wrapped around a tree, or squandered it on extravagances like video game systems or the latest gadget (these days that would likely be an iPad, a few years ago it was an xbox 360) yeah, sure splurging on something every now and then for putting up with everything you do overseas is fine, but I got a lot more satisfaction by being that much richer after deployment.

One of the simplest and best options while overseas, is also one of the most overlooked. The Savings Deposit Program, or SDP is an excellent way to rack up a bit of interest on your already tax free pay. The program yields a guaranteed 10% APR, and although it maxes out at $10,000 it doesn't take very long to get to that point while deployed. You have to be in country for 30 days before you can sign up for it (your time in Kuwait counts, so you can really sign up before you get fully into sector) and one of the best things about this program is that you still receive interest on your money for 90 days after DEROS (date of estimated return from over seas) so on a 12 month deployment you'll receive 14 months of quarterly interest payments.

When I was in Iraq I alloted every cent of my paycheck to go to the SDP, and any incidentals that I needed – which wasn't much - I put on a credit card (USAA will drop your credit card interest rates to 2% for the duration of any deployment, so you're turning a profit by delaying payment) in about 3 months, after the interest payments, I was more or less maxed out at $10K and stopped the allotments (you can make cash or check deposits too, but you have to go to the finance office on whatever FOB you're close to, and sometimes thats more trouble than its worth). I even withdrew the interest when it went over the max so I wasn't losing any opportunity cost. All in all, I made more than $1000 in interest from a 15 month deployment, and the craziest thing was that I was the only soldier in my company that enrolled in the program. This is a great opportunity while you are overseas, and if you don't take advantage of it, you're missing out.

I spoke with an accountant friend of mine about taxes overseas, and taxable income specifically for this blog. It's no secret that your pay while deployed is tax free, but what is taxable are capital gains. Any investments that you make and earn money off of is taxable (the profit from it, not what you invested)
while you are overseas and have Internet access – not a given by any means if you're in an Infantry outfit or another combat role, feel free to play the market – buy low and sell high. USAA and most other banks offer investment programs and investment advice (for a fee, of course). If a stock or mutual fund is doing well, of course you don't want to sell it, but if you see a plateau or you think it has toped out for the moment, sell it and then reinvest low. Any profit you make you'll owe taxes on, but thats the beauty of investing while deployed – if your entire taxable income is just a few thousand dollars, you likely won't pay a dime come tax time. Even if you don't want to start investing on your own or day trading, being deployed is a great time to get involved with an investment program, which are fairly easy to get started and a definite force multiplier for your cash.

One government program that I do have an issue with is the Thrift Savings Plan, of TSP. I contributed to my TSP for about 8 months while I was in the Army before I decided it just wasn't worth it. This package is sold as a 401K type deal for soldiers, but it really isn't. There are no matching investments (which is odd, considering they match investments for DOD civilians, just not service members) and the investment options are just way to conservative for my tastes. I am young, as are most people in the military, and an aggressive investment plan is really the way to go in the long run – you'll make way more money than playing it safe, and anything that doesn't do well because it is aggressive, is canceled out through your diversification (which is why I like mutual funds – instant diversity). Yes, its true, anything invested in the TSP is tax free till you retire, and that has some advantages, but when you are deployed, and everything is tax free, that takes away the only perk. The TSP is all well and good, but I would have made a lot more if I had simply kept investing instead of contributing to my TSP.

Once again guys, stay safe over there. I'm truly sorry I can't go with you this time (to the point that I'm seriously considering commissioning to the National Guard... I have unfinished business). Keep your heads down, and don't blow this chance to walk away with a bit more cash.

Don't Tread on Me!

8 comments:

  1. SDP really is a great deal. If nothing else, it's easy to set up even at a small FOB, and you don't have to do a damned thing with it. The only thing I didn't like is that they wouldn't allow you to allot money until it filled to $10k and automatically turn it off. Kinda stupid if you ask me.

    Hope 2-4 IN gets out there and kicks some ass.

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  2. This is the kind of insightful, intelligent and original type of writing we were talking about.

    Very cool. Never knew any of that.

    BigVig209

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  3. Wow glad I read this. I'd been wondering about TSP after reading about it in the RTC Guide. Good tips, thanks!

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  4. Wow, you have an overly inflated self-image and an arrogance that pierces through the Internet. It's probably not good to dole out life experience and long term investment experience when you have none. It reminds me of the young 20 somethings 10 years ago telling everyone to buy real-estate because they didn't remember the mid-80's housing crash that is seldom brought up but hurt so many. The Stock Market is a mess and it's fine for you to be an idiot, but don't recommend it to others. Over speculation and get rich quick shysters like you all think they can make big money in risky investments and it creates huge booms and busts that hurt so many people. Over the long term you'll see great returns, if you exclude the mammoth collapses that always bring the risky markets back down to earth (that no one can predict).

    The SDP is the only thing of value you recommended. You just need to get a good slap of reality. It sounds as though your parents helped you with college and you fancy yourself an expert with money. You cite yourself as a businessman, why, because you waste money on the stock market or run some crappy website (you probably play online poker too). You give Army Officers a bad name.

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  5. Jeff, I am glad that you liked my recommendation of the SDP, considering it is the only thing that I specifically recommended. I do not fancy myself an expert with money, nor do I claim to be one, and as I stated in my blog, I sought the expert advice of Accountants and Bankers before posting. I have just seen too many young soldiers squander their pay on meaningless trinkets rather than do something productive with it.

    While I did not recommend any by name, the investment programs that I am involved with are through UBS and USAA - and any bank where a soldier receives direct deposit will have financial advisers to assist in asset management. Mutual funds and CD's, which besides real estate, is all that I am currently invested in, minimize risk through diversification and federally insured programs, and are actively managed by experts in the fund's field.

    The market has not done well of late, and many people are still in the red because of it, but that is precisely why an investment now is worth more than an investment ten years from now.
    My advice in individual market investment was aimed more at taking advantage of tax incentives while deployed rather then recommending penny stocks or other shady programs. I began investing in mid 2008, while overseas, in aggressive, but actively managed mutual funds, and through regular contributions and dollar cost averaging, I have turned a 26% ROI, or roughly 10% APR

    I do not offer get rich quick advice, as I myself am certainly not rich, and have worked hard for every penny. You yourself admit that an individual will see great returns on market investments - and no, the mammoth collapses are included therein. Through the history of the Stock Market, the DJIA averages an 11.7% increase annually - and this includes the market crash of 1929, the 12 years of the Great Depression, and yes, even our recent unpleasantness. These lean years bring down the fat times like the late '90's where CEO's were fired in disgrace for showing a meager return of 30-40%.

    True, those who are retired, or about to retire are better off playing it safe with conservative retirement investments through a 401K or an IRA - but even these plans offer more aggressive approaches. Every professional financial planner you talk to will recommend an aggressive portfolio and regular investments (it's called paying yourself first) for someone in their 20's - as most soldiers are - because that is money that they don't see, and will not spend, while any dips that the market takes are canceled out by dollar cost averaging and gains over the long run.

    As far as your personal attacks on my character (which quite clearly speaks to your own internet arrogance) I may be young, but I have seen a lot of life. I had a full scholarship to college, earned through my own merits, and would not have been able to attend school otherwise. My parents did not pay a dime for my education, and I am the only one of my siblings to have graduated. I call myself a businessman because I run my own franchise, I am employed by a Forbes top 500 Company, and I am in my second year of my MBA in a highly rated program. Rather than a "shyster" as you call me, I am a man of integrity, and have had subject matter experts review this blog before I dared post it. This is my opinion, one that has been solicited numerous times, and If you don't like my advice, then don't listen to it.

    As to giving our leadership a bad name? I doubt that anyone I ever served with would agree with you on that.

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  6. Jeff, please do sound off with your credentials. I'd be particularly interested to see what your basis of comparison is for Marshall's service, because he was an outstanding Soldier with some serious contributions to the deployed mission as a linguist and Infantryman. Your reading comprehension leaves much to be desired, because Marshall has never insinuated that he is an Army officer.

    As he points out, the great thing about this blog is, like everything else in the media today, your ability to shut up and go elsewhere if you don't like it.

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  7. Hey Marshall,
    Great article. I don't know who Jeff is, but he sounds like a troll. One thing to add is that TSP now has a Roth version that makes it much like a Roth IRA, which we all know is the best way to go with untaxed deployment money because you get the tax break of both the traditional IRA up front and the Roth IRA on the back end.
    I'd also recommend looking into the Servicemembers Civil Relief Act which allows deployed service members to reduce interest rates on debt(even credit cards) to 6%.
    You can find out more about that and a few other things here:
    http://www.militaryinvesting101.com/free-report/
    It's the most in depth report I've seen online. And it's free.
    Cheers and God speed!

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    1. Val,

      Thanks for your comment! I was unaware of a Roth option for the TSP, and as you mention, that would be a great way to avoid later taxes if the money was invested tax free during a deployment. I am still not much of a fan of the TSP in general (though I still contribute) and extra money I have will go to my other investments.

      The servicemember's civil relief act is something that I am familiar with, and if you have USAA (which a lot of servicemembers do) they will reduce your credit card rate to 2% while deployed. This is what I did, putting my entire check into the SDP while overseas, and any incidentals that i needed went onto my USAA card... so that I was still pulling a margin of 8%. Of course as soon as my SDP was maxed out, I stopped contributions and paid off my credit card, but that was only after I was turning straight profit on the SDP.

      I'll have to check out militaryinvesting101.com

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