Home > Financial Resources > Military Saves > Savings Guide > Investment options

Investment Options

Although this is by no means a complete list, here are a few of the most commonly used investment options available to you as a service member.

Community Bank Savings Account – A good choice for establishing emergency funds and saving for short-term goals. It offers competitive rates (compared to similar accounts), easy access to funds, and is FDIC-insured.

Community Bank Certificate of Deposit (CD) – Another good option for maintaining an emergency fund and saving for medium-term goals. It offers a higher return than a savings account (although there is a penalty for early withdrawal). A Community Bank CD can be opened with a minimum deposit of $1000, and may be used as collateral for other loans.

Savings Deposit Program (SDP) – A short-term investment program for income earned in combat and qualified hazardous-duty areas. It guarantees a 10% annual rate of return on deposits of up to $10,000 during a single deployment. Although your hazardous-duty pay is tax-free, you will have to pay tax on the interest you earn. Interest continues to accrue for 90 days after you return from the combat zone.

Thrift Savings Plan (TSP) – A retirement savings and investment plan for both uniformed and non-uniformed federal employees. This is a defined contribution plan, which means the amount you eventually receive in payments is determined by your contributions and the interest you earn. It shares these tax advantages with IRAs or 401ks:

No taxation of income you contribute to your TSP account, until withdrawal, for amounts up to $16,500 (as of 2009). This has several important advantages. First, your contributions are deducted from your taxable income, lowering your current tax bill. Also, because the interest you earn is untaxed, you have more money that compounds over time, which adds to your earnings. You will pay tax at the time of withdrawal, but many people still pay less tax than they would have because they are in a lower tax bracket once they retire.
An additional tax credit of up to $1000 on contributions, if your income is less than a certain amount.
Tax deferment for an additional $5500 in contributions, if you are over 50 (as of 2009).

Additional features specific to the TSP include:

Five types of funds from which to choose, with varying degrees of potential return and risk. You can select your own mix of funds or contribute to a fund that automatically balances risk and return for you. This balanced fund has the advantage of automatically reallocating money from higher-risk investments to lower-risk ones as you approach your target date for withdrawal.
The ability to borrow against your account balance, as long as you are an active-duty service member. At any given time, you may take out one general-purpose loan and one loan for purchase of your primary residence. You will have to pay tax on the money you withdraw, as well as an interest rate set to the current rate of return for the TSP’s Government Securities Investment Fund. However, since the interest you pay goes into your own account, essentially this is an interest-free loan. Repayment periods range from one to five years for general-purpose loans and from one to 15 years for residence loans. The minimum loan amount is $1000.
Relatively low, partially-subsidized administrative costs around .03% of your account balance.

For more information on the Thrift Savings Plan, go to www.TSP.gov.

These investment options are not specific to the military.

Brokerage Account – A general investing account that helps you build and manage a diversified portfolio. It works the same as an IRA, but with no tax deferments and no penalty for early withdrawal.

Individual Retirement Account (IRA) – Works much the same as the TSP and allows you to make tax-deferred contributions into an investment account.

Roth IRA – A variation on the traditional IRA in which contributions are taxed at the time they are made instead of when they are withdrawn.

401k & Roth 401k – Function the same as an IRA, but are employer-sponsored.

529 College Savings Plan – A state- or state agency-sponsored program designed to aid investing for college. Parents often establish a 529 account for children when they are young. Even though contributions are made after-tax, withdrawals are made tax-free, as long as the money is used at an accredited two- or four-year university.

Currency ExchangeNote Rates displayed reflect local currency rates, and are applicable if the currency exchange is performed in that country. For example, the rate for GBP is the rate offered if purchased in the United Kingdom.

Currency:


U.S. Buys:

Currency Cost Unit:

Date Effective:

Currency Calculator