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Hi I am a 21 transitioning Marine with some knowledge but would love advice.
Old 11-19-2015, 03:43 AM   #1
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Hi I am a 21 transitioning Marine with some knowledge but would love advice.

Hi, my name is Zane I'm currently transitioning out of the Marine Corps. I started doing some investing when I was 19 with about 5000 in stocks and bonds I ended up losing about 1000 and am cautious on what my next move should be. I currently have about 11000 in two separate personal IRAs and another 10000 in my savings. I want to grow my money as much as possible but am worried about not having enough money on hand for when I get out and start going to college. If anyone could advise me on any kind of course of action I would greatly appreciate it.
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Old 11-19-2015, 04:00 AM   #2
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The money in your IRAs can't be touched without penalty until age 59 1/2. There are some exceptions to that, but the idea is that you don't want to touch that money until retirement, so as far as that $11,000 goes, you shouldn't touch it other than to maybe consiladate the accounts and put it in a Vanguard Target Date retirement fund. That'll do you well. I'd probably choose the most aggressive one if it were me at your age (I'm guessing age 23-25), which I think is a 90% stock and 10% bond. These are good funds and you can just forget about it for the next 20 years if you want, and it'll adjust to be more conservative over time. Did you contribute at all to the TSP? If so, you could potentially roll over your IRAs to the TSP, which is a fantastic program. The TSP has Lifecycle funds, which are great if you don't want to do the asset allocation yourself.

As for the remaining $10,000, I'd just keep that as an emergency fund and not do anything with it. You could move it to Barclays and get a whopping 1%. Use the GI Bill and go to school full-time, and get a part-time job as well. Any extra money you earn, I'd use to cover what the GI Bill does not, and if you have money left over from that, then I'd put it in the Roth IRA at Vanguard. If you still have money after that, I'd put it in savings and use that as money to help with the transition between graduation and employment. However, you ALWAYS need to have some sort of emergency fund, so keep that in mind as you plan your future. I would say your immediate financial goal right now should be to get out of school without any debt; do that, and you'll be ahead of almost everyone.
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Old 11-19-2015, 05:01 AM   #3
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No I didn't sign up for the tsp. At the time when they told us about it in boot camp they explained it as the government investing our money for us and I didn't like the sound of that or the way they explained it. Do you know if I could move both my IRAs to the tsp before I get out? I'm currently 21 and as long as I go to a public college my gi bill covers 100% of my tuition and I get extra money for books and housing expenses. I've been hearing some stuff about vanguard are they an investment firm like fidelity or something?
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Old 11-19-2015, 07:26 AM   #4
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If you're not out yet, then I'd absolutely recommend you put as much money as you can into Roth TSP. Once you have money in there, then you can transfer money into your account after you leave the service. However, if you get out and don't have a TSP account, you can't get a TSP account. I don't know if you can move the money before hand, but if you go to TSP.gov, you can probably read up on it and get your answer. However, either way, I don't think you move money into the TSP unless you've created an account by contributing at least something from your base pay, so start that process today as it can take up to 30 days for it to go into effect.

Vanguard is an investment firm, but they are unique becasue they are owned by the investors, which is why they have the lowest fees.
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Old 11-19-2015, 07:43 AM   #5
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Pick a career that will pay a decent salary. Or go into business for yourself. The next 30 years will go by fast when you look back.

The foundation you lay now will impact you for the rest of your life, for better or worse. Set up a solid foundation, and you will be set. Get into trouble now, and your life might not ever be the same.
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Old 11-19-2015, 03:00 PM   #6
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However, you ALWAYS need to have some sort of emergency fund, so keep that in mind as you plan your future. I would say your immediate financial goal right now should be to get out of school without any debt; do that, and you'll be ahead of almost everyone.
+1 Agreed, very good advice!

Hey captain,

Thanks for your service. You're off to a great start at such a young age. You have much greater savings than about half of our friends and they've all been working for decades.

Something to keep in mind longer term is to choose a life partner, assuming you want one, that has similar values about money. Sense about money and a longer term perspective is not very common. Good to think things through a bit before getting too involved...

FB
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Old 11-19-2015, 03:19 PM   #7
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In your profile you talked about wanting to retire early. If you haven't already done so, check out bogleheads.org and mrmoneymustache.com. Those site will be right up your alley.
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Old 11-19-2015, 03:51 PM   #8
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If you're at a loss for how to start just pick a target date fund to get started. Those will be aggressive at your age and then get more conservative as you get older. I also agree on establishing the TSP - that has about the lowest expense ratios you'll find anywhere and over a long time that matters a lot.

Recommended reading:

Millionaire Teacher by Andrew Hallam

How a Second Grader Beat Wall Street by Alan S. Roth

Your Money & Your Brain by Jason Zweig

Why Smart People Make Big Money Mistakes by Gary Belsky and Thomas Gilovich


Here's a letter I wrote about a year ago to a young lady who is a family friend - we kind of think of her as a niece. She had a tough time growing up and dealt with much more than any child should have to. She got her act together, paid for her own two-year degree and now has a good job and is in the Navy Reserves. She had many of the questions you do.

Dear Sarah:

As we briefly discussed I have sent you several books on saving and investing ordered from Amazon. This stuff is important to learn since what you do or don’t do now will dictate your lifestyle when you do retire. And while I know that right now retirement is so far over the hill that you find it hard to conceive, let alone see, trust me (I was once 24 years old) that day will eventually and inevitably come either voluntarily or involuntarily because of health issues. What the financial services industry wants is your money so that they can take as big a chunk of it for themselves as they can. They are running a business, and the sole purpose for the existence of a business is to make money. They don’t give a damn about how well funded your retirement is. Never forget that.

Fortunately this stuff is not rocket science despite what the financial services industry would have you believe. In fact it is so simple that a second grader can do it as the title of the book How a Second Grader Beats Wall Street implies. I have my own portfolio invested in just this manner and it is performing as advertised. I recommend that you first read either that book or The Millionaire Teacher first. Another point not emphasized strongly enough is that the 401(k) with company match at 5% of pay or so is a starting point and is not nearly enough to fund a retirement. To do that you will need to save 15% to 20% of your pay, right off the top. Take any employer match first – that’s free money and anyone is a fool to not accept the maximum offered. After that further investment goes into a Roth IRA or 401(k) up to the legal limit. After that the savings/investment goes into a taxable account. This is called “Paying yourself first”. If you believe that “Gee, I can’t afford that!” I will say this: You can’t afford not to. The retirement clock is ticking, right now, and that clock does not stop for anyone.

I spend about ten or fifteen minutes a year managing our investments. Once you learn how it really isn’t that hard. And again, what you do now in your 20’s will have a huge effect on how your life will be in your 60’s and beyond. Your future self will either pat you on your back or say “What an idiot I was!” You know what it should be.

The other books are about psychology and exploring why you do the things you do with money. I’ve always wondered why people do the weird things they do, and some of the weirdest are with money. The short answer is that human beings evolved to survive on the plains of Africa, not do long-term financing. The result is that while your gut instincts and emotions will tell you to do exactly the right thing to survive for the short term, in the long term, what your guts and emotions tell you to do is the worst possible thing to do with your money. That is very difficult to do and it does take a while to learn to do it. And that, dear Sarah, is the hardest part of saving and investing: ignoring your instincts and emotions. You have to learn to ignore the sinking feeling and near-panic when the stock market drops half its value (and sure as tomorrow’s sunrise, some day it will) and with it half the value of your retirement fund. That’s when investing and staying the course is the hardest.

During the last Great Recession in 2008 when so many people panicked and sold their investments one investment broker said the only people buying stocks were people in their 80’s. “They had seen this movie before and knew how it ended.” You will read that in one of the books, I forget which one.

A mantra we have learned the hard way is LBYM, or Live Below Your Means. Spend Less Than You Earn. Pay Yourself First. The thing about loans is twofold. One is that in taking one out your future options and opportunities are limited by the amount of the loan and the interest you are then committed to paying on it. The other is that you are then funding someone else’s retirement and not yours. Not all loans are bad of course. You do need a car to get to work in and it does not have to be a new one. You also have to have a roof over your head and depending on circumstances buying on credit may be wise. But do make sure that whatever you buy on credit will still be around when the loan is paid off. You have by now been in the position of “paying for a dead horse”. Not fun, is it? Remember how that felt too.

One other thing, and then this already-too-long letter will end. Why am I doing this? We do care deeply about what happens to you. No child should have to endure what you and Heather did growing up. What we admire about you is what and who you are in spite of it. So many others turn miserable and take to drugs and alcohol and hate the world because of their circumstances and spend their lives as miserable people.

But not you. You got your act together, went to school (the hard way, paying for it yourself). Not many people have the self-discipline to do that. I also think that you are one of the few people who will actually do two things; read those books and then act on what you learn from them. While investing doesn’t take high intelligence or math skills (not to imply that you don’t have those!) I believe that what you do have that so few others do is the maturity to defer immediate gratification for long term gain. That’s another difficult part about saving and investing.

Please do not feel overwhelmed at the volume of material. It digests easily, but slowly, so take your time going through them, and I realize that you do have a life. There is no expectation that you will read them this month or even in the remainder of this year and there will be no quizzes, except for the one in 30 years or so. If you pass you can retire. If you don't you'll have no choice but to keep working. But understand clearly that what you do or don’t do with your money now will have a multiplying effect on your standard of living in the last half or third of your life.

If you can find a job that has a pension plan remember that every dollar of pension income is one less that has to be generated by investment income. But it is always better to be in a career that you enjoy. Too many people work at well-paying jobs they hate and get sick or die early because of the stress. But as retired employees of Detroit are learning to their dismay that promised pension may not materialize so it is best not to rely too heavily on promises. No one has a clue where the economy is going to be in 5 years, let alone 30. So while an employer that is financially sound now, as Detroit was in the 1960’s ‘70’s and ‘80’s, may not be when you retire. Plan on that scenario as well.

The best to you always,


Walt 34
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Old 11-19-2015, 04:54 PM   #9
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All good advice above, and you are extremely very well for your age.

Just want to add what I told my son. The most important investment you will make right now is in your education. Get the right education, in a field where there is demand, and some barrier to entry, such as those requiring knowledge of math, engineering, science, accounting, etc. Get out of school without debt. The value of a good education will trump any other investment decision you will make at this point in your life.

Second, resist marrying right away. Make sure you make the right decision here. No amount of earnings, savings or investments will save you from a spendthrift spouse. And whatever you make you will loose half or more in a divorce. Choose wisely!
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Old 11-19-2015, 05:35 PM   #10
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Want to Retire Early, based on what I have seen here, there is no better way than staying for 20! May not be true by the time you get to 20, but there seem to be a fair size group of folks on here that retired form military service. Not what you want to here, but hey, it works! Get your degree in service, and go for the Officers rank. The Marines are tops, IMHO, at transitioning enlisted to officer. The increase in pay, and quality of life is worth it. My son presently has 7 years enlisted reserves, and 13 years active as an officer. His plans are to retire in 7 and never work again. The enlisted time has kept him is the upper pay grade for each rank grade.
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Old 11-20-2015, 12:54 AM   #11
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Like what Rustic said, the services become very different once you get some rank under your belt. However, the AF is an exception because they tend to treat everyone with respect regardless of rank. Early retirement is quite easy with the current military retirement system. I see it changing in the future, but it hasn't changed yet, and it's the path I'm using to for early retirement. I calculate my retirement benefit to be over 2 million, and it starts right when I retire in my 40s and not at age 65. But if it's not for you, then there's no reason to stay.


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Old 11-20-2015, 06:26 AM   #12
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You sound very similar to my brother who is currently in the armed services as well. I suggest doing what he is, and take advantage of both the low cost of living while in the service and your future free college experience. A couple thousand more saved today will be worth ten's to hundred's of thousands of dollars more in 30 years. Without college debt you're already ahead of the game! So take advantage of being ahead of the 21 y/o who just got out of school with a basketweaving degree and $160k in student debt!

As for losing money, as long as you don't pull it out of your IRA you haven't truly "lost" anything. Go with Vanguard or another low cost provider and keep socking money away. At 26 I'm still learning to handle the market going "down" but until it starts moving up and down more in a day/month than I can put in in a year I'll eventually be able to ignore the market noise.

Good luck to you, and glad to see another 20 something person on the forums!
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Old 11-23-2015, 09:16 AM   #13
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No I didn't sign up for the tsp. At the time when they told us about it in boot camp they explained it as the government investing our money for us and I didn't like the sound of that or the way they explained it. Do you know if I could move both my IRAs to the tsp before I get out?
Traditional IRA balances can be transferred to the TSP. However the TSP does not yet have a process that allows transferring a Roth IRA to the Roth TSP. I doubt that will happen before you leave active duty.

In your situation, transfer your traditional IRA to the TSP if you have one. If you don't have a traditional IRA then just keep maximizing your contributions to your Roth IRA.

If you choose to drill in the Reserves then you can contribute your drill pay to the TSP. I wouldn't join the Reserves or the National Guard for just that reason, but it's one way to make some TSP contributions.

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I've been hearing some stuff about vanguard are they an investment firm like fidelity or something?
They're both financial institutions, and they both have good funds with low expenses. Some people use both, others use just one. It's possible that Vanguard has more restrictions and fewer customer services in order to keep their costs at rock bottom, but Fidelity has also annoyed many investors over the years with restrictions and customer-service problems.

You may get some price breaks for putting more of your assets at one place. For example they both lower their expense ratios on some funds if you invest a bigger amount or have a larger account size.

If you haven't read "The Military Guide" yet then check for a copy at your local base or public library. The first six months of posts on the blog have excerpts from the book, or you can scroll through the archives for interesting titles:
http://the-military-guide.com/post-titles-by-month/
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Old 11-23-2015, 09:52 AM   #14
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The money in your IRAs can't be touched without penalty until age 59 1/2. There are some exceptions to that, but the idea is that you don't want to touch that money until retirement...
One of those exceptions is college expenses. Education is a worthwhile investment and it might be better to use that money to set yourself up for a lucrative career and bigger savings down the line rather than squirrel away a bit of money now and let that grow on its own.
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