Military Investing 101: The Complete Guide to Building Wealth in Uniform

Why Military Members Have a Unique Investing Advantage

If you're serving in the U.S. military, you have access to one of the most powerful wealth-building toolkits available to any American worker. Yet many service members don't fully utilize these benefits, leaving potentially millions of dollars on the table over their careers.

Between the Thrift Savings Plan (TSP), the Blended Retirement System (BRS), tax-free combat zone contributions, and other military-specific benefits, you have opportunities that civilian workers can only dream about.

This guide covers everything you need to know about military investing—from the basics to advanced strategies that can set you up for financial freedom, whether you serve 4 years or 40.

The Thrift Savings Plan (TSP): Your Retirement Foundation

The Thrift Savings Plan is a retirement savings and investment plan for federal employees and uniformed service members. Think of it as the government's version of a 401(k)—but better in almost every way.

Why the TSP is Superior to Most 401(k) Plans

That expense ratio difference might seem small, but over a 30-year career, it can mean tens of thousands of dollars more in your pocket instead of going to fund managers.

The Five Core TSP Funds

The TSP offers five individual funds, each designed for a specific purpose:

G Fund (Government Securities)

• Invested in special U.S. Treasury securities
• Guaranteed never to lose principal
• Returns typically beat inflation slightly
• Best for: Capital preservation, short-term savings

F Fund (Fixed Income Index)

• Tracks the Bloomberg U.S. Aggregate Bond Index
• Invests in government and corporate bonds
• More volatile than G Fund but higher potential returns
• Best for: Conservative investors, those near retirement

C Fund (Common Stock Index)

• Tracks the S&P 500 (500 largest U.S. companies)
• The backbone of most aggressive TSP portfolios
• Historically returns ~10% annually over long periods
• Best for: Long-term growth, younger investors

S Fund (Small Cap Stock Index)

• Tracks the Dow Jones U.S. Completion Total Stock Market Index
• Invests in small and mid-cap U.S. companies
• Higher volatility but potentially higher returns
• Best for: Aggressive growth, diversification beyond large-caps

I Fund (International Stock Index)

• Tracks the MSCI EAFE Index (Europe, Australasia, Far East)
• Provides international diversification
• Currency fluctuations add additional volatility
• Best for: Global diversification

L Funds (Lifecycle Funds)

Don't want to manage your own allocation? The TSP offers Lifecycle (L) Funds that automatically adjust your mix based on your target retirement date:

• L Income: Already retired or within 5 years
• L 2025, L 2030, L 2035... Target retirement year funds
• L 2065: For those retiring 40+ years from now

L Funds start aggressive (heavy C, S, I) and gradually shift to conservative (heavy G, F) as you approach retirement. They're a solid "set it and forget it" option.

The Blended Retirement System (BRS) Explained

Since January 2018, all new service members are automatically enrolled in the Blended Retirement System (BRS). Understanding BRS is critical to maximizing your military benefits.

The Three Components of BRS

1. Defined Benefit (Pension)

• Reduced from 50% to 40% of base pay at 20 years (2% per year instead of 2.5%)
• Still provides guaranteed lifetime income
• Cost-of-living adjustments (COLA) after age 62

2. Defined Contribution (TSP Matching)

• Automatic 1%: DoD contributes 1% of your base pay regardless of your contributions
• Matching contributions: DoD matches your contributions dollar-for-dollar up to 3%, then 50 cents on the dollar for the next 2%
• Maximum match: 5% of base pay (when you contribute at least 5%)

3. Continuation Pay

• One-time bonus at the 12-year mark
• Ranges from 2.5x to 13x monthly base pay (varies by service and specialty)
• Requires commitment to serve 4 additional years

BRS vs. Legacy: Which is Better?

If you joined before 2018 and had the choice, the answer depends on your plans:

• Planning to serve 20+ years? Legacy system (higher pension) may be better
• Unsure or planning to separate early? BRS is often better (you keep TSP matching even if you don't hit 20)
• Deploying frequently? BRS + combat zone contributions can be extremely powerful

For new service members, there's no choice—BRS is your system, and it's actually quite good when you understand how to maximize it.

Combat Zone Tax Exclusion: The Ultimate TSP Supercharger

Here's where military investing gets really interesting. When deployed to a combat zone tax exclusion (CZTE) area, your income becomes tax-free, and your TSP contribution limits skyrocket.

The Numbers That Change Everything

In 2024:

• Normal TSP limit: $23,000
• Combat zone limit: $69,000 (the "annual addition limit")

That's right—you can contribute up to $69,000 to your TSP while deployed, and if you're contributing to a Roth TSP, that money grows completely tax-free forever.

Why This Matters

Consider an E-5 deploying for 12 months:

• Base pay + BAH + BAS + hostile fire pay might total $5,000-6,000/month
• In a combat zone, all of this is tax-free
• If you can live frugally (many expenses are covered while deployed), you could potentially max out or come close to the $69,000 limit

$69,000 invested at age 25 in a Roth TSP, growing at 10% annually for 40 years = $3.1 million in tax-free retirement income.

That's from a single deployment.

Beyond the TSP: Other Military Investment Options

While the TSP should be your primary retirement vehicle, military members have access to other investment opportunities:

Savings Deposit Program (SDP)

Available during eligible deployments:

• Deposit up to $10,000
• Earn 10% annual interest, guaranteed
• Interest compounds quarterly
• Funds available 90 days after deployment ends

Where else can you get a guaranteed 10% return? Nowhere. Max this out before increasing TSP contributions during deployment.

Individual Retirement Accounts (IRAs)

You can contribute to a traditional or Roth IRA in addition to your TSP:

• 2024 limit: $7,000 ($8,000 if over 50)
• Roth IRA offers more flexibility (withdraw contributions anytime)
• Good for additional tax diversification

Taxable Brokerage Accounts

Once you've maxed out tax-advantaged accounts, consider a regular brokerage account:

• No contribution limits
• No early withdrawal penalties
• Useful for mid-term goals (buying a house, bridge to retirement)
• Consider low-cost index funds similar to TSP options

Real Estate (VA Loan Advantage)

The VA loan is one of the most powerful wealth-building tools available:

• No down payment required
• No private mortgage insurance (PMI)
• Competitive interest rates
• Can be used multiple times throughout your career

Many military members use VA loans to purchase properties at each duty station, eventually building a real estate portfolio that generates passive income in retirement.

TSP Investment Strategies for Military Members

Now that you understand the accounts, let's talk strategy. How should you actually invest your TSP?

The "Set It and Forget It" Approach

If you want simplicity:

• Choose an L Fund matching your retirement timeline
• Contribute at least 5% to get full BRS matching
• Increase contributions with each promotion or pay raise
• Don't touch it until retirement

This approach will serve you well and outperform most American investors simply by staying the course.

The Aggressive Growth Approach

For younger service members (20+ years from retirement):

• Allocate 80-100% to C Fund and S Fund
• Accept higher volatility for higher expected returns
• Gradually shift to bonds (G, F) as retirement approaches

The Strategic Allocation Approach

For those willing to be more active:

• Use seasonality patterns to time fund rotations
• Move between aggressive (C, S, I) and defensive (G, F) funds based on historical patterns
• Our TSP seasonality strategies have historically outperformed buy-and-hold by 3x or more

This approach requires more attention but can dramatically accelerate wealth building.

Common Military Investing Mistakes to Avoid

Learn from others' mistakes so you don't repeat them:

1. Not Contributing Enough to Get the Full Match

Under BRS, you need to contribute 5% to get the full 5% match. Contributing less is literally leaving free money on the table. That's a 100% instant return you're missing.

2. Staying 100% in G Fund

The G Fund is safe, but "safe" doesn't build wealth. Over 30 years, the difference between G Fund (~2.5% return) and C Fund (~10% return) is staggering. A $10,000 investment becomes:

• G Fund: $20,976
• C Fund: $174,494

Don't let fear cost you $150,000.

3. Cashing Out When Separating

If you leave the military before retirement, do not cash out your TSP. You'll pay income taxes plus a 10% penalty, potentially losing 30-40% of your balance. Instead:

• Leave it in the TSP (still benefits from low fees)
• Roll it into your new employer's 401(k)
• Roll it into an IRA

4. Not Taking Advantage of Deployment

Deployments are temporary wealth-building opportunities. The combination of tax-free income, reduced expenses, and increased contribution limits is powerful. Don't waste it.

5. Waiting to Start

Every year you delay costs you exponentially. Starting at 18 vs. 28 can mean the difference between retiring a millionaire and retiring with far less. Time is your greatest asset.

Building a Complete Military Financial Plan

Investing is just one piece of the puzzle. Here's the full picture:

Step 1: Establish an Emergency Fund

• 3-6 months of expenses in a high-yield savings account
• Covers unexpected costs without raiding retirement accounts

Step 2: Eliminate High-Interest Debt

• Pay off credit cards and personal loans
• Use the SCRA to reduce interest rates where applicable

Step 3: Maximize TSP Match

• Contribute at least 5% to get full BRS matching
• This is non-negotiable—it's free money

Step 4: Build Additional Savings

• Increase TSP contributions toward the annual limit
• Consider Roth IRA for additional tax diversification
• During deployment: SDP first, then max Roth TSP

Step 5: Invest Beyond Retirement Accounts

• Taxable brokerage for mid-term goals
• Real estate using VA loan benefits
• Consider small business opportunities

Resources for Military Investors

Official Resources

• TSP.gov - Official TSP website for account management
• Military OneSource - Free financial counseling for service members
• Personal Financial Counselors (PFC) - Available at most installations

Tools We Offer

• TSP Backtester - Test investment strategies against historical data
• TSP Seasonality Strategies - Proven allocation strategies with email alerts

The Bottom Line: Your Military Advantage

As a service member, you have access to:

• The lowest-cost retirement plan in America (TSP)
• Free matching contributions (BRS)
• Tax-free investing during deployments
• Guaranteed 10% returns (SDP)
• Zero-down home loans (VA)
• Free financial counseling

These benefits exist because your service matters. The best way to honor that service is to take full advantage of every opportunity to secure your financial future—and your family's future.

Whether you serve 4 years or 40, the investing habits and accounts you establish now will compound for decades. Start today. Your future self will thank you.

Frequently Asked Questions

Q: Can I contribute to both Traditional and Roth TSP?

A: Yes! You can split contributions between Traditional (pre-tax) and Roth (after-tax) TSP. The combined total cannot exceed the annual limit ($23,000 in 2024).

Q: What happens to my TSP if I separate before 20 years?

A: Your contributions and their earnings are always yours. Under BRS, you keep matching contributions if you've served at least 2 years. You can leave the money in TSP, roll it to an IRA, or roll it to a future employer's plan.

Q: Should I use Traditional or Roth TSP?

A: Generally, Roth is better for junior enlisted (lower tax bracket now). Traditional may be better for senior officers (higher tax bracket now). In combat zones, always use Roth—you're contributing tax-free money that grows tax-free forever.

Q: How do I access my TSP account?

A: Visit TSP.gov and log in with your account credentials. You can also manage your account through myPay by adjusting contribution percentages.

Q: Can my spouse contribute to my TSP?

A: No, but they can open their own IRA (Traditional or Roth). If your spouse works, they should also maximize their employer's retirement plan.

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Investment involves risk, including potential loss of principal. Consult with a qualified financial advisor before making investment decisions. TSP fund performance varies and past returns do not guarantee future results.