The first millionaire I’ve met was in San Antonio, Texas. It was 2007 and I was a couple months out of the Naval Academy. I was at the beginning of my professional journey as a Cryptologist and that millionaire worked for me. Think about that, the first millionaire I’ve met, worked for me. I was 23 years old and broke. He was 26 years old, a millionaire, and flat out brilliant.
What I later learned, was the Chief learned to buy investment properties early in life from his Father who was a real estate agent. At each duty station in the Navy, he bought more properties. He also never sold. As a result, by the time he was 26, he had roughly 17 properties and was an expert at utilizing the benefits of the military.
The military is not for everyone, but for those are cut out for it and learn to utilize their military experience as a steppingstone, you can do quite well for yourself. Here are four ways to achieve millionaire status while in the military.
The tried-and-true method: 20 years and retire a millionaire.
Here is the bottom line up front: If you have the commitment, dedication, the patience to work in the military 20 years you will be a millionaire with minimal effort outside of your job.
Now how is this possible?
Military retirements are based off of the base pay of the highest rank achieved and committed 36 months of service. To demonstrate this lets look at two scenarios: an enlisted person who retires at E-7 and a officer who retires at O-5, and both have a post-retirement life expectancy of up to 85 years of age.
Enlisted E-7 who retires in 2020 with 20 years of creditable active duty service.
Officer, E-5 who retires in 2020 with 20 years of creditable active duty service.
If you think of a military retirement, as an annuity, then your 20 years of service made you a multimillionaire. Thats not half-bad in my book.
We live in a time were people are working into their later years. A military retirement alleviates the inherent need to so because it creates some degree of financial independence. This also allows you to pursue opportunities that you truly believe but would not have pursued previously secondary to financial insecurity.
The real estate way.
The military has done a poor job of educating veterans on the Veterans Affairs (VA) home loan. The Chief, mentioned above, was an expert at using this loan. He bought his first property while stationed in Hawaii, at the age of 18, and was obligated to live in the barracks. He also accomplished this with no money down. And he bought a duplex.
The VA home loan is the equivalent of a wealth generating cheat code. VA home loan rates are often the best rates found on the market and it’s a program backed by the federal government.
Some of the benefits a VA home loan include:
- Zero downpayment in some scenarios.
- No private mortgage insurance (PMI)
- Limited closing costs
- NO prepayment penalties
- Ability to reuse the VA home loan package.
The VA loan covers residential mortgages, which most folks use to buy a single family home. However residential mortgages include up to 4 units, i.e. duplex, triplex, quadplex. This is where a VA home loan really helps, the ability to purchase a multifamily property with zero down.
Now per regulations, VA home loans are used for primary residencies and you must occupy the home at least for 1 year, but I am not entirely sure how they enforce or audit that requirement. The Chief mentioned above utilized his VA loan to purchase duplexes and triplexes as a way of increasing his wealth. With every duty station, he repeated the process. Thus by the time he was 26 he was a millionaire based solely upon his real estate portfolio.
The Investor way
Now I have publicly stated that I’m not a huge fan of the Thrift Savings Plan (TSP) but that is because I dislike the lack of transparency and has nothing to do with its performance or easy of adoption in the military. Thus, I wholeheartedly believe that the TSP is the best retirement program out there, despite its limitations.
Just like any 401(k) or 403B, the TSP has a $19,500 per year contribution max (unless doing catchup contributions after age 50). Contributing the max for 20 years in the military and receiving on average a 9% return will generate one million dollars in value.
This approach takes zero effort but a lot of commitment and patience. Its the similar approach as passive index fund investing, however to max out your TSP contribution may require you to live well below your means as a junior officer or junior enlisted. If you can tolerate this, you’ll be a millionaire.
Please note the above is a simplified example and does not take into account the matching contributions which has been recently introduced to military members.
The savvy veteran way
The savvy veteran is the one who does all three and maximizes his/her ability to create financial independence from 20 years of military service. This is the hardest scenario because it requires your time and commitment achieving financial goal while surviving the ups and downs of life. The reality is it can be done, and these are a few scenarios in which the military helps create veterans who are millionaires.
So on this Veterans Day, I say congrats to those who have come before me and those who come after me, and well on their way along their millionaire journey. Happy Veterans day.
As always if you have questions or concerns regarding creating an emergency fund, investing, real estate, insurance, or planning for the future, don’t be afraid to speak with qualified financial advisor. Smart Asset has a great tool to find an advisor in your area or feel free to email me (contact@surgifi.com) to help you on your path to financial independence.
Follow us on Social Media