By Ryan Guina
Posted in Articles
Deployments are challenging events, but thankfully, the government offers military members a few financial incentives to compensate them and their families for the sacrifices they make while being deployed. While none of these incentives can take the place of being safe at home with their loved ones, they do offer an opportunity for saving and investing that should not be overlooked.
Here are a few places to invest while you are deployed.
I always increased my Thrift Savings Plan, or TSP, contributions before I went on a deployment because the TSP offers special benefits for earnings made in a tax-free deployment zone. The Thrift Savings Plan offers similar benefits to those offered by a 401k plan for civilian workers. Like the traditional 401k, service members can make pre-tax contributions that reduce taxable income.
However, when you are deployed your income is already in a tax-free status, therefore contributions made during this period will be free of tax altogether. Like a traditional 401(k) plan, TSP withdrawals in retirement are normally taxed. However, the contributions you make with tax free income while you were deployed will result in tax free withdrawals in retirement. The tax-free portion of your TSP will only be limited to the withdrawals, not any earnings from the withdrawals, and will be distributed on a prorated basis as a portion of your entire portfolio (meaning you won”t be able to choose how and when you make the tax free withdrawals). Even with those small limitations, this online casino’s is an excellent deal!
The Roth IRA is one of the most popular investment vehicles available to both civilians and military members. Individuals who fall within the income thresholds set forth by the IRS can contribute to a Roth IRA with taxable income. Thanks to the HERO Act, tax-free income from a military deployment can now be included in Roth IRA contributions.
This allows service members to participate in a Roth IRA with tax-free income. Where civilians make contributions with income that has already been taxed, deployed military members are able to contribute tax free income and get the qualified distributions that are always tax free with a Roth IRA.
How does a guaranteed return of 10% sound? The Military Savings Deposit Program (SDP) is only available to the men and women serving in a designated combat zone, and it offers a guaranteed return of 10% for deposits up to $10,000. T
here are a few restrictions with the SDP, regarding how and when you can make contributions and withdrawals, but there is no other investment I am aware of that offers a guaranteed 10% interest rate. You will be able to earn 10% on deposits as soon as you are in country for 30 days and until 90 days after redeployment.
This program requires a little bit of paperwork, but I always found it beneficial when I deployed and took advantage of it whenever I could! Deployed servicemembers should contact their finance department for more information about the Savings Deposit Program.
If you have a short-term investment horizon and don”t want to invest for retirement at the moment (or have already maxed our your retirement options), then consider investing in self-directed investments such as stocks or mutual funds. This strategy offers short term access to investments that would otherwise be held up until the end of deployment or retirement. While the flexibility to withdraw investments is a necessary reality for many military families, as much income as possible should be directed to long-term investment tools. By taking advantage of these strategies listed here, the possibility for growth could be very rewarding in the long run.