Im an E-6, single. Been in for 6 years. I currently have no debt, Roth IRA is following an S&P 500 mutual fund which is maxed out yearly, 35% of my base pay is going into my Roth TSP C and S funds, I’m under the BRS. I have 6 months of savings in a HYSA. I was looking into opening a brokerage account but I was told to max the TSP out first. I also want to get into real estate but I’m not sure where to start. Any recommendations for passive income? What else can I do to set myself up financially in the future? Any advice is appreciated, thanks
Investment
- Thread starter dsimple
- Start date
resjudicata
New member
@dsimple Shit pimp youre doing well. I would agree max your tax advantage accounts first- real estate is expensive and a slippery slope for ya as AD military. It can be done but when you get dealt a shitty hand (bad tenant) you leave yourself open to get squeezed.
An alternate to real estate i would do if i were you (its what i do) is the taxable brokerage as an account to build then after leaving the military in the rearview. I will bust open the piggy bank- pay off main residence- buy rental property. Then all additional income will go into clearing rent debt- then acquire another property after thats paid off. I never plan on over leveraging/ buying properties so far out of the way i cannot comfortably manage. Just food for thought- but yes max that tsp (i would look at commissioning as a next career goal).
Just my 2 cents man. Im a 12yr o3e- been maxing tsp/2x iras for 5 years now. Coasting. And i can get out of the military tomorrow and not even bat an eye.
An alternate to real estate i would do if i were you (its what i do) is the taxable brokerage as an account to build then after leaving the military in the rearview. I will bust open the piggy bank- pay off main residence- buy rental property. Then all additional income will go into clearing rent debt- then acquire another property after thats paid off. I never plan on over leveraging/ buying properties so far out of the way i cannot comfortably manage. Just food for thought- but yes max that tsp (i would look at commissioning as a next career goal).
Just my 2 cents man. Im a 12yr o3e- been maxing tsp/2x iras for 5 years now. Coasting. And i can get out of the military tomorrow and not even bat an eye.
kentmathai
New member
@dsimple You’re doing fantastic so far, congrats.
6 months’ emergency fund is “proper” for most people, but probably a little conservative given the job security of the military. Nevertheless, it’s a good thing to have, so, not suggesting you change that.
Yes, you should probably max your TSP before you open a brokerage account—retirement accounts are relatively untouchable, but compound interest is a fantastic thing.
Once you’re maxing TSP and IRA each year, if you want to open a brokerage account, I’d recommend using Vanguard and just contributing $X/month to VTSAX
If you want to be more aggressive, you can pick a few individual stocks instead of or in addition to VTSAX, but if you do, I’d recommend sticking to blue chip/buy-and-hold companies and not messing around with day trading, penny stocks, or crypto—just my personal opinion
If by “get into real estate” you mean investing in REITs to diversify your portfolio, then that’s fine, just do your research. If you meant housing, then look to buy the next time you PCS, but obviously pay very close attention to current rental rates and rental supply/competitiveness in that area, then factor in 10% on top as a property management fee once you leave, and see if the numbers make sense
Honestly, you don’t need to change too much at the moment - the slow, methodical, boring stuff like TSP, IRA, and brokerage contributions aren’t sexy, but they’ll set you up for a very nice life in 15, 25, 35+ years
6 months’ emergency fund is “proper” for most people, but probably a little conservative given the job security of the military. Nevertheless, it’s a good thing to have, so, not suggesting you change that.
Yes, you should probably max your TSP before you open a brokerage account—retirement accounts are relatively untouchable, but compound interest is a fantastic thing.
Once you’re maxing TSP and IRA each year, if you want to open a brokerage account, I’d recommend using Vanguard and just contributing $X/month to VTSAX
If you want to be more aggressive, you can pick a few individual stocks instead of or in addition to VTSAX, but if you do, I’d recommend sticking to blue chip/buy-and-hold companies and not messing around with day trading, penny stocks, or crypto—just my personal opinion
If by “get into real estate” you mean investing in REITs to diversify your portfolio, then that’s fine, just do your research. If you meant housing, then look to buy the next time you PCS, but obviously pay very close attention to current rental rates and rental supply/competitiveness in that area, then factor in 10% on top as a property management fee once you leave, and see if the numbers make sense
Honestly, you don’t need to change too much at the moment - the slow, methodical, boring stuff like TSP, IRA, and brokerage contributions aren’t sexy, but they’ll set you up for a very nice life in 15, 25, 35+ years
@dsimple
A lot of people take a "just maximize the number in my account in 30 years" approach to finances, and I'd offer that's the wrong approach.
The right approach is to set out financial goals and develop a plan to get there.
One of your goals is to support yourself in retirement, meaning age 60 and beyond. Whether you should increase (or even decrease) your retirement contributions depends upon whether or not you're going to hit be able to provide your income needs in retirement.
Over-investing into retirement accounts will lead to opportunity costs or quality of life costs during your working years.
The other strange thing about reddit is that a lot of people love retirement accounts, but then shy away from taxable brokerage accounts. I'd offer that for a servicemember in particular, 6 months of expenses in a savings account is ultra conservative unless you're looking to transition out of the service. Your healthcare costs are dirt cheap, and you have no chance of job loss unless you break the law (don't do that). This is the money that you could (and IMO, should) put into a diversified brokerage - it's there to be liquidated "just in case" or maybe for a big purchase down the line, but invested in a way that will outpace inflation over time. Don't ignore fixed income assets.
Anyway, we can't really answer your questions in more detail without understanding your financial goals.
As far as an investment property, people make it seem like being a landlord is some busy nightmare scenario when it isn't. Yeah, once in a while you have to call a plumber or show the place to new tenants, but it's like less than 10 hours of work a year.
What I will tell you is that if you are looking at purchasing a single family home as an investment property, you're going to be cash flow negative for the first decade because your rent is effectively going to be capped by needing to be less than mortgage rates. You're applying a "growth" strategy to your wealth insofar as the tenants are paying down your mortgage and you have an asset that is more likely than not to outpace inflation by 2-4% per year over time, and you get to recouperate most of that when you eventually sell off.
Most servicemembers cannot afford this, particularly if the property is vacant for a month or two, and eventually end up selling.
A lot of people take a "just maximize the number in my account in 30 years" approach to finances, and I'd offer that's the wrong approach.
The right approach is to set out financial goals and develop a plan to get there.
One of your goals is to support yourself in retirement, meaning age 60 and beyond. Whether you should increase (or even decrease) your retirement contributions depends upon whether or not you're going to hit be able to provide your income needs in retirement.
Over-investing into retirement accounts will lead to opportunity costs or quality of life costs during your working years.
The other strange thing about reddit is that a lot of people love retirement accounts, but then shy away from taxable brokerage accounts. I'd offer that for a servicemember in particular, 6 months of expenses in a savings account is ultra conservative unless you're looking to transition out of the service. Your healthcare costs are dirt cheap, and you have no chance of job loss unless you break the law (don't do that). This is the money that you could (and IMO, should) put into a diversified brokerage - it's there to be liquidated "just in case" or maybe for a big purchase down the line, but invested in a way that will outpace inflation over time. Don't ignore fixed income assets.
Anyway, we can't really answer your questions in more detail without understanding your financial goals.
As far as an investment property, people make it seem like being a landlord is some busy nightmare scenario when it isn't. Yeah, once in a while you have to call a plumber or show the place to new tenants, but it's like less than 10 hours of work a year.
What I will tell you is that if you are looking at purchasing a single family home as an investment property, you're going to be cash flow negative for the first decade because your rent is effectively going to be capped by needing to be less than mortgage rates. You're applying a "growth" strategy to your wealth insofar as the tenants are paying down your mortgage and you have an asset that is more likely than not to outpace inflation by 2-4% per year over time, and you get to recouperate most of that when you eventually sell off.
Most servicemembers cannot afford this, particularly if the property is vacant for a month or two, and eventually end up selling.
@dsimple Just remember if you retire from the military @ 20 years and you are ~40 years old, you can’t pull from your tax advantage accounts until 59 1/2 (except contributions). You will have your retirement, but at half the income (or 40% if BRS). This is why I’m contributing to a brokerage account to cover the “gap”. I can use that account to supplement my military retirement until 59 1/2. Then it’s all gravy.
