It's Mission Critical to Create a Financial Plan For Your Future
By the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy
It’s mission critical to create a financial plan for your future.
If you haven’t done so already, it’s a perfect time to get started since this week (October 2-8, 2017) is World Investor Week. This global effort, promoted by the International Organization of Securities Commissions to raise awareness of the importance of investor education and protection, marks the first time securities regulators on six continents will join together to highlight what it means to be a smart investor, as well as ways to avoid fraud. A key best practice promoted by World Investor Week is to plan for and invest according to your future needs and goals. One of the most important goals you can plan for is your retirement.
As a member of the military, saving and investing—especially for retirement—may feel like the least of your concerns. But knowing how to secure your financial well-being is one of the most important things you’ll ever need in life. Luckily, you just need to know a few basics, form a plan, and be ready to stick to it. These three steps can help you get started:
- Make a financial plan.
- Pay off any high-interest debts.
- Start saving and investing as soon as you’ve paid off your debts.
A good financial plan includes a list of the things you might want to save and invest for—a house, college fund, retirement—and the timeline for each. It also requires an honest assessment of your current financial situation. If you are spending all of your income, you’ll need to look for ways to cut back on your expenses in order to start saving and investing.
Few investment strategies pay off as well as, or with less risk than, simply paying off all high-interest debt you may have. This generally includes credit cards, which may have interest rates of up to 18 percent or more.
Once you have a financial plan and have paid off any high-interest debts, it’s time to consider how to make your money grow. Your savings are the money you earn, but don’t spend. When you invest, you try to make the money you earn grow.
One of the biggest things you’ll need to invest for is retirement. As a member of the military, you are currently under the Legacy Retirement System, which is a defined benefit plan, but starting January 1, 2018, active duty service members with fewer than 12 years of total service will be eligible to opt into the newer Blended Retirement System (BRS). BRS which is a combination of a retirement annuity and employer contributions to a defined contribution plan, known as the Thrift Savings Plan (TSP). It’s important to know which system applies to you, and to understand its features and benefits. Reservists and National Guard members with fewer than 4,320 retirement points as of Dec. 31, 2017 are also eligible to opt into the BRS.Service members under both retirement systems are eligible to make employee contributions to the TSP. The TSP offers the same type of savings and tax benefits that many private corporations offer their employees under 401(k) plans. The TSP also offers easy enrollment, automatic saving, and low fees and expenses. The TSP website explains more about the benefits available to the military.
All investments involve some degree of risk. You can help protect yourself and your money by making informed investment decisions. Investor.gov, the SEC’s website for individual investors, offers a variety of educational materials. It also includes a free search tool that allows you to check the registration status and background of investment professionals.
For more basics on managing debt and credit, saving and investing, planning for retirement and protecting yourself from fraud, see “Financial Readiness: Saving and Investing for Military Personnel.” Consider it mission accomplished once you have a financial plan in place that best fits your needs and goals.
The Securities and Exchange Commission disclaims responsibility for any private publication or statement of any SEC employee or Commissioner. This article expresses the author’s views and does not necessarily reflect those of the Commission, the Commissioners, or other members of the staff.
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