military unique investment strategies?

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Homunculus

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since we have more than a few bright folks in here, i was wondering if there are any unique investment opportunities or advantages to being in the military.

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USAA membership is probably the best overall part, since they offer a lot of good banking, investment and insurance deals. Too numerous to go into here. Go to USAA.com if you're interested in what they offer.

There is a "thrift savings plan" that allows part of your salary to be put away on an automatic basis.

And then, of course, there is the 20 year retirement at 1/2 pay (3/4 pay if you stay for 30 years). Just remember that for docs that is half of your BASE PAY for rank (usually lieutenant colonel or full colonel by the time you retire) and DOES NOT include any of your specialty bonus pay, etc. At current pay rates you'd get about 35-40K per year, plus medical coverage and ongoing PX/commissary priviliges. You have to make your own decision as to whether this is worth the tradeoff of 20+ years of making half what you'd make in the civilian world, a topic which has been covered in detail in lots of other threads.

Other than those, I can't think of much else; I'd be interested to hear about anything else that might be out there.

Oh, yeah, I guess if you consider education and training as "investments" you can always do various schools, degrees, fellowships, etc.
 
Actually, your investment opportunities are severely hampered by the military. USAA is ok, but as a physician, you can easily find financial advisors/planners that will find you better opportunities.

Your "retirement plan" is 0% vested until 20 years, when you become fully vested. Two ways to look at that. After 20 years, you get a pretty good annuity....the longer you live the more it is worth....assuming the government doesn't cut back on benefits...and I'm not so sure they won't.

The other way to look at it, is that this "retirement plan" that is not vested until 20 years is preventing you from saving in any of the tax deferred accounts that any other physician is eligible for....401K, Keogh, SIMPLE IRA, IRA, etc....and if you leave before 20 years, you got nothing.

All together, your opportunities to invest in tax deferred accounts is restricted because of your retirement plan which doesn't "roll over" if you leave before 20 years (and most people can't stand 20 years). The TSP is a joke!!! $12,000 per year limit this las tax year...that is an insult to any practicing physician who makes any kind of a good income.

Your investment opportunities are otherwise same as anyone elses, just no tax deferred accounts.

One other thing that gets you is your ability to get disability insurance...the military disability sucks (based on base pay only), and it is not based on your ability to practice in your specialty, but because you have "group disability" from the military, you cannot buy a full disability policy from a regular insurer assuming that they are willing to insure a military doc.
 
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One advantage is that some of your income is not treated as income and this may allow you (as it does in my case) to contribute to a Roth IRA when you would not otherwise be eligible. A Roth IRA, started in your mid-20s, with max contributions until military retirement (when your income will hopefully make you ineligible) and an 8% rate of return would be worth about $1 million at age 65. If your spouse earns enough to cover his/her contribution (3K) at the moment, you can have two of these accounts.
Given the likelihood that you will earn significantly more in private practice, a Roth IRA is a better deal than a traditional IRA. This way you are paying the income tax now, at a lower rate than when you will get distributions.
Just as an aside, the military retirement annuity (O6 over 24, your typical USU retiree) is worth about $1 million in today's dollars.
Don't bother with the TSP until you've maxed the Roth for you and your spouse (if you've got one ;) and even then, you give up a lot of control for a relatively small benefit. Unless they start matching someday...(which is about as likely as militarymd staying for 20).
 
I have mutual funds (Roth IRA) through USAA. I like these funds because they perform well, they are no-load funds, and the expense ratios are competetive. They don't have much support in the way of hands-on financial advisors, but if you are a do-it-yourself kind of investor, their funds are pretty good. Their S&P 500 Index Fund usually gets good marks by the "experts."

I have been contributing to TSP since it was offered to active duty, and I am happy with it's performance. It's kicking the crap out of the Putnam funds that I made the mistake of investing in back in '99.

If you are into it, there is also the option to get involved in Federal long-term care insurance. I don't know much about this.

In my opinion, stay away from a company called First Command. They are an insurance-investment company that targets military personnel. They are big into selling boatloads of insurance and heavily loaded funds that don't perform all that well.
 
Just wondering if anyone knew if TSP is an option for HPSP students? Are we considered inactive reserve, ready reserve, or something else? Thanks for the help.
 
HPSP is inactive ready reserve and is generally inelidgable for most stuff...although you can use USAA and all its benefits as well as AAFES and PX shopping.

Same reason we don't get insured. Actually I think the military is kinda dumb in this regard. Military medical students are probably the healthiest class of people around (i.e. cheapest to insure) , they would probably save money by just putting all the HPSP students into Tricare.
 
I have the HPSP scholarship, and I see many benefits besides the fact that I get to serve my country. My education time is counted towards Retirement time. And if I do a residency through the Air Force, I am considered active duty, and receive full military benefits, including base housing. I would also receive a higher pay than my civilian colleagues. I get to spend more time with my family, and more time to study. By the time I serve my obligation of 4 years, I can stay for another seven, and then retire (4 years of D.O.school, 5 years of residency, 4 years of obligation time, plus 7 years of continuous active duty service=20 years). After I retire, I can open up my own practice, or join a civilian hospital/clinic and make two incomes. (retirement pay + current work pay) ;)
 
There is also the VA Home Loan which allows you to buy a home with no money down. It won't help much in states like California, since it's capped around 300K, but it worked for me in the Midwest.

Also, if you put into the GI Bill you can use it down the road in case you wanted to get an MBA, JD, other graduate degree or you can pass it on to your kids. I signed up for it in 98 and the $1000 I put down is paying my $1200/month non-taxable pay in med school + HPSP!

medicine1 said:
I have the HPSP scholarship, and I see many benefits besides the fact that I get to serve my country. My education time is counted towards Retirement time. And if I do a residency through the Air Force, I am considered active duty, and receive full military benefits, including base housing. I would also receive a higher pay than my civilian colleagues. I get to spend more time with my family, and more time to study. By the time I serve my obligation of 4 years, I can stay for another seven, and then retire (4 years of D.O.school, 5 years of residency, 4 years of obligation time, plus 7 years of continuous active duty service=20 years). After I retire, I can open up my own practice, or join a civilian hospital/clinic and make two incomes. (retirement pay + current work pay) ;)
 
medicine1 said:
I have the HPSP scholarship, and I see many benefits besides the fact that I get to serve my country. My education time is counted towards Retirement time. And if I do a residency through the Air Force, I am considered active duty, and receive full military benefits, including base housing. I would also receive a higher pay than my civilian colleagues. I get to spend more time with my family, and more time to study. By the time I serve my obligation of 4 years, I can stay for another seven, and then retire (4 years of D.O.school, 5 years of residency, 4 years of obligation time, plus 7 years of continuous active duty service=20 years). After I retire, I can open up my own practice, or join a civilian hospital/clinic and make two incomes. (retirement pay + current work pay) ;)

Not sure where you're getting your information but your numbers are off. If, and that's a big IF, your med school years count, which I highly doubt unless you are USUHS, you would have to do 20 years for those 4 to count. In other words, your 4 years of DO school will not count UNTIL after you reach 20...then they would count and now you have 24. They only count once you reach 20 WITHOUT them. So you would have to have 11 years of active duty and not just 7.

Since you are caught up with the retirement income answer me this...how does the state you are thinking about retiring in tax military pensions? In good ole Maryland it's taxed as earned income..."if you can dream it, Maryland will tax it" There aren't many states which allow the "retiree" to keep their full pension.

On paper your numbers are wonderful...they're a far cry from the reality. Get in and then see how long you make it. There's a good reason you don't see many docs who are on the military retirement plan these days. Not busting your bubble...just letting you know how gravity will affect it.
 
medicine1 said:
I have the HPSP scholarship, and I see many benefits besides the fact that I get to serve my country. My education time is counted towards Retirement time. And if I do a residency through the Air Force, I am considered active duty, and receive full military benefits, including base housing. I would also receive a higher pay than my civilian colleagues. I get to spend more time with my family, and more time to study. By the time I serve my obligation of 4 years, I can stay for another seven, and then retire (4 years of D.O.school, 5 years of residency, 4 years of obligation time, plus 7 years of continuous active duty service=20 years). After I retire, I can open up my own practice, or join a civilian hospital/clinic and make two incomes. (retirement pay + current work pay) ;)

IRR time does not count towards retirement. HPSP scholarship time does NOT count toward retirement

Don't let your recruiter fool you.
 
sge1970 said:
Also, if you put into the GI Bill you can use it down the road in case you wanted to get an MBA, JD, other graduate degree or you can pass it on to your kids. I signed up for it in 98 and the $1000 I put down is paying my $1200/month non-taxable pay in med school + HPSP!
While you are correct in some ways about the GI Bill, there are some things you are wrong about, and there are some things that won't apply to many of the people on these forums considering entering the military to pay for medical school.

Military members are only entitled to pay into the GI Bill system if they have not received any type of military educational assistance before they enlisted or commissioned. If you are receiving the HPSP, attended a service academy, or had ROTC pay for your schooling, then you are ineligible to sign up for the GI Bill for later educational use. You can use GI Bill benefits and the HPSP at the same time, as you are doing, but you had to have enrolled in the GI Bill, and been fully vested in it, before you applied and were accepted for the HPSP.

Although Congress passed the Natl Defense Authorization Act in 2001 that allows for the transfer of GI Bill benefits to your dependents, the eligibility for that program is determined by the services, who designate critical specialties for the program. To date, none of the services have implemented the program, so you cannot transfer your benefits to your dependents as you claim. In the future, other military members may be able to transfer their benefits once the provisions of the NDAA are enacted by all the services, but you cannot.

Current Active Duty GI Bill benefits are capped at $1004, if you are not receiving a kicker or receiving the Army College Fund. You must be receiving one of those two payment supplements if you are making $1200/mo from the GI Bill.
 
Croatalus_atrox said:
While you are correct in some ways about the GI Bill, there are some things you are wrong about, and there are some things that won't apply to many of the people on these forums considering entering the military to pay for medical school.

Military members are only entitled to pay into the GI Bill system if they have not received any type of military educational assistance before they enlisted or commissioned. If you are receiving the HPSP, attended a service academy, or had ROTC pay for your schooling, then you are ineligible to sign up for the GI Bill for later educational use. You can use GI Bill benefits and the HPSP at the same time, as you are doing, but you had to have enrolled in the GI Bill, and been fully vested in it, before you applied and were accepted for the HPSP.

Although Congress passed the Natl Defense Authorization Act in 2001 that allows for the transfer of GI Bill benefits to your dependents, the eligibility for that program is determined by the services, who designate critical specialties for the program. To date, none of the services have implemented the program, so you cannot transfer your benefits to your dependents as you claim. In the future, other military members may be able to transfer their benefits once the provisions of the NDAA are enacted by all the services, but you cannot.

Current Active Duty GI Bill benefits are capped at $1004, if you are not receiving a kicker or receiving the Army College Fund. You must be receiving one of those two payment supplements if you are making $1200/mo from the GI Bill.

The other caveat with the GI Bill is you have 10 years from your date of seperation to use it. The Navy's response to transferring your benefits is to have the service member re-enlist for a minimum of 4 years. It's not really your money and this is the Navy's way of proving it.
 
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militarymd said:
IRR time does not count towards retirement. HPSP scholarship time does NOT count toward retirement

At least for the Army, your statement is not entirely true. For an "Active Duty," 20-year retirement, you are correct, HPSP does not count.

However, if you seek a Reserve retirement, "retirement credit (up to 50 points per year) may be authorized for up to four years of time spent in HPSP for participants..." (HPSP Handbook 11/04). The key here is that 50 points equals a "good year" for a reserve retirement. This may be appealing to those with prior service or those who plan to enter the Selected Reserve after completing their active duty requirements.

12 "Good years" credited toward a reserve retirement (4 IRR/HPSP years + 4 Active + 4 Selected Reserve) can make a big difference, vs 8 "good years," if you are trying to make a decision to stick it out for a retirement or not.

I am not trying to split hairs here, but there is a difference; and telling people that HPSP doesn't have any retirement value could lead someone to make an uninformed choice.
 
spc213 said:
At least for the Army, your statement is not entirely true. For an "Active Duty," 20-year retirement, you are correct, HPSP does not count.

However, if you seek a Reserve retirement, "retirement credit (up to 50 points per year) may be authorized for up to four years of time spent in HPSP for participants..." (HPSP Handbook 11/04). The key here is that 50 points equals a "good year" for a reserve retirement. This may be appealing to those with prior service or those who plan to enter the Selected Reserve after completing their active duty requirements.

12 "Good years" credited toward a reserve retirement (4 IRR/HPSP years + 4 Active + 4 Selected Reserve) can make a big difference, vs 8 "good years," if you are trying to make a decision to stick it out for a retirement or not.

I am not trying to split hairs here, but there is a difference; and telling people that HPSP doesn't have any retirement value could lead someone to make an uninformed choice.

When discussing retirement, reserve retirement is rarely discussed because that doesn't start till you're at least 59.5 years old. If you're going to inform people lay at least the major points on the table.
 
Croooz said:
When discussing retirement, reserve retirement is rarely discussed because that doesn't start till you're at least 59.5 years old. If you're going to inform people lay at least the major points on the table.

Crooz,
Good point. I didn't cover that because it's very well documented on other threads. Thanks!
 
So let me get this straight: when I go on active duty, I will no longer be able to contribute to my traditional 401k, but I will be able to contribute to a Roth IRA?

Also, I've heard of HPSPers buying into the GI bill when they go on active duty, then using it to supplement residency/fellowship pay once they get out. However, everyone here seems to say that you can't use the GI bill once you take HPSP????
 
DaveB said:
So let me get this straight: when I go on active duty, I will no longer be able to contribute to my traditional 401k, but I will be able to contribute to a Roth IRA?

No, you will not be able to contribute to your 401k -- that's offered by your employer, once you stop working for them, you can no longer contribute. The military does have a version of the 401k called the Thrift Savings Plan. Unfortunately, there is no matching, but hey at least there is something. You can continue to do your Roth and, as previous posters have said, should contribute the maximum to that before any into TSP.

Ed
 
edmadison said:
No, you will not be able to contribute to your 401k -- that's offered by your employer, once you stop working for them, you can no longer contribute. The military does have a version of the 401k called the Thrift Savings Plan. Unfortunately, there is no matching, but hey at least there is something. You can continue to do your Roth and, as previous posters have said, should contribute the maximum to that before any into TSP.

Ed
1) From a regular line O-3: militarymd's advise is solid.

2) Regarding the GI bill and HPSP: I don't know. However, my job includes some dealings with the Defense Financial Accounting Service (DFAS) and student debt collection: they will get the money. They've come asking my office for documents from ten years ago for court cases they're still prosecuting. You may have heard the DoD under pressure to save money. Something about a war or two....

Go to gpoaccess.gov and browse the US Code, Title 10, to find out the law regarding various education expenses. A good place to start is section 2005, payback rules. Also, check DFAS's site. Don't believe recruiters. They're good people, but they're not trained in law (ask any of them is they know where to find the US Code on line), and they're rewarded for the number of bodies they get into various programs.
 
when calculating your Basic pay, does years of residnecy (reserve basically) count as "year in serivce", or is that just acitve?

and does anyone know a good pay calculating site? fo some reason all the websites that were listed in prior threads are inactive

thanks

a
 
aatrek said:
when calculating your Basic pay, does years of residnecy (reserve basically) count as "year in serivce", or is that just acitve?

and does anyone know a good pay calculating site? fo some reason all the websites that were listed in prior threads are inactive

thanks

a
If you do a military residency, then that is active duty and the years spent in residency will count toward time in service when calculating your base pay. A good site for calculating your take home pay after taxes is this one, but it won't do any specific military calculations for you:

http://www.paycheckcity.com/

If you want to calculate what you'll make in the military, just search through some old threads and you'll find the info you need. All you need to do is find the 2005 pay table which is online, and then search for the old threads which will tell you which pay you're eligible for.
 
Sledge2005 said:
If you do a military residency, then that is active duty and the years spent in residency will count toward time in service when calculating your base pay. A good site for calculating your take home pay after taxes is this one, but it won't do any specific military calculations for you:

http://www.paycheckcity.com/

If you want to calculate what you'll make in the military, just search through some old threads and you'll find the info you need. All you need to do is find the 2005 pay table which is online, and then search for the old threads which will tell you which pay you're eligible for.


thanks for the reply, but how about if you did residency civilian but were in the reserves at that time (FAP). Do those years in the reserve count?

thanks for your help
A
 
aatrek said:
thanks for the reply, but how about if you did residency civilian but were in the reserves at that time (FAP). Do those years in the reserve count?

thanks for your help
A

Unfortunately not.
 
usaa is a good deal, but everything else not so sure. i tend to agree with militarymd.

by the way, if you do 20 years, you only get 40% retirement b/c of the law change a few years ago.
 
aatrek said:
when calculating your Basic pay, does years of residnecy (reserve basically) count as "year in serivce", or is that just acitve?

and does anyone know a good pay calculating site? fo some reason all the websites that were listed in prior threads are inactive

thanks

a

Recommend you refer to this reference when determining years of creditable service for pay purposes: http://www.dod.mil/comptroller/fmr/07a/07A01.pdf
 
http://www.defenselink.mil/militarypay/

The site above is probably the best for calculating what you are going to earn. It also has a good retirement calculator/explanation. You will see that 20 years does not mean you only get 40% base pay if you don't want it. You have two options on retirement: 1) if you reach 15 years, you can take a pay out of $30,000 and then you'd only get 40% at 20yrs or 2) you can pass on the payout and still get the 50% at 20 yrs.
 
aatrek said:
thanks for the pdf file.
If am reading it correctly, it seems like reserve years do count for pay (countrary to the comments above????) ??

Yep, Reserve time counts for pay purposes. However, any time spent under HPSP/USUHS/FAP is not creditable for pay purposes.
 
Judging from friends who were Reserve, Reserve time counts for pay purposes, but not for promotion/retirement (at least not directly).
 
denali said:
Yep, Reserve time counts for pay purposes. However, any time spent under HPSP/USUHS/FAP is not creditable for pay purposes.

You mean "active reserves" ....ie drilling reserves.

HPSP/FAP are inactive reserves....so those years don't count towards pay purposes.

USUHS are active duty....so their years count towards pay purposes??????...but not for retirement....but than they count after reaching 20 years of other service.


Sounds confusing??? Get used to it.
 
militarymd said:
You mean "active reserves" ....ie drilling reserves.

HPSP/FAP are inactive reserves....so those years don't count towards pay purposes.

USUHS are active duty....so their years count towards pay purposes??????...but not for retirement....but than they count after reaching 20 years of other service.


Sounds confusing??? Get used to it.

One shouldn't try to lump HPSP/USUHS/FAP into the standard rules for "reserves" or "active duty" for pay purposes, because each program's specific reimbursement structure is tied directly to the portion of U.S. Code that established it.

That being said, recommend you refer to the DOD Financial Reg I linked to. In a few short pages it makes very clear that reserve duty, active or inactive, counts as creditable service. It also makes clear the exceptions--USUHS/HPSP/FAP are specifically addressed.
 
So, I guess since this is a thread on finances I'll ask some questions so it is more relevant (though not much seems to have changed).

In 2011 as a new O-3 (hopefully) right out of medical school how much am I expected to earn? I have seen figures, including all special pays and what not at ~$72,000.

I am an avid saver. I got the Navy HPSP bonus and tucked it into a savings account (I am trying to transfer into a money market) and will be investing that money, plus a few thousand extra into a few Vanguard funds.

I have a Roth and was considering, leaning heavily, to transfering that to Vanguard and their Total International index. I'm fairly risky and I figure I wont lose the money, don't need it now, so more risk, more reward. At the least I figure I'll just be a little ahead instead of rolling in dough. Right? ;)

My family has a lot of military and some did TSP. I am not sure if I want to do TSP, is it worth it? There is NO match, though of course it is "authorized." And just some light reading of the poorly designed website of TSP (seriously it looks like an amateur website! it's embarrassing) it seems they are the "average/common" 401k with the crappy/severely limited choice of where to park your money.

There is the benefit of taking off 16,000 from your income and dropping you into a lower tax bracket, yet? But then that is saving today but robbing tomorrow. Even the more risky TSP plans seem to under perform Vanguard, and they have similar fees.

Basically I am hoping I can live off of base pay (my needs are not very grand, all I need is rent, my car which I will drive into the ground, good food but I don't eat out more than a few times a month, and some entertainment like a computer game/360 game/cable TV/high speed internet). I don't go off an splurge on things. Hell, I was all hell-bent on getting a PS3 now that the BR v HD DVD is all over, but I thought about it and cheaped out and didn't buy it. Glad I didn't.

So, any advice for a 23 year old who is trying to be optimistic about his finances in the military in a few years, or even as an HPSP student?

(and it does suck that retirement is based on base pay. I explained this to my dad, who is retired career who thinks it is the best system ever that it is genuinely an unfair system. Sort of the military's last "haha gotcha! fool!" before you leave it)
 
I'm no expert, but here's a few tidbits:

-Remember that your BAH (if you live off post) isn't taxable. That can drop you to a lower tax bracket.

-You should be maxing out on your Roth IRA before you put anything into TSP. TSP is a decent investment, but I get the feeling that its existence is mainly geared to the faceless masses that don't put too much time into their retirement planning. You can do better with some basic research.

-You mentioned rent. Depending on how long you anticipate being at your first duty station, consider buying. Renting is almost always more cost effective in the short-term, but the longer you stay somewhere, buying becomes more fiscally solvent because of both the tax break on the mortgage interest as well as the (expected) capital gain on the property.
 
So, I guess since this is a thread on finances I'll ask some questions so it is more relevant (though not much seems to have changed).

In 2011 as a new O-3 (hopefully) right out of medical school how much am I expected to earn? I have seen figures, including all special pays and what not at ~$72,000.

So, any advice for a 23 year old who is trying to be optimistic about his finances in the military in a few years, or even as an HPSP student?

(and it does suck that retirement is based on base pay. I explained this to my dad, who is retired career who thinks it is the best system ever that it is genuinely an unfair system. Sort of the military's last "haha gotcha! fool!" before you leave it)

You will be in great shape when you graduate compared to all those who took out a ton of loans for school since you can start investing right away in your retirement.

Who cares that the military retirement is an all or nothing plan (20 years or nothing at all). Good luck finding a company now that offers you a solid pension on the outside. What you save for your future on your own will be what you have regardless of in the military or not.

If you stay in after your four year committment, you will obviously be making a poor financial decision for your future...but that is for another thread. And something to be looked at as no one can predict doctor's wages 10 years from now.

The more you can put away early on in your career the better off you will be down the road. I for one do not plan on working much after my 50s. If I do, it will be a couple days a week on my terms and no one elses.

As for your pay as a CPT, you are probably right on the money. Use this web site to get an idea of what you will be making:

http://www.defenselink.mil/militarypay/pay/calc/

You can tack on 8-10% for pay raises over the next 3 years, plus add any special pays to that total. Your BAH and BAS are not taxable.
 
You can tack on 8-10% for pay raises over the next 3 years, plus add any special pays to that total. Your BAH and BAS are not taxable.

Don't know who is paying you, but I certainly have not been seeing this much increase. More like 2-4% for base pay over the past couple of years. In addition, your ASP and VSP hasn't changed since God knows when.

In fact, pay increases are not even keeping up with inflation!
 
You mentioned rent. Depending on how long you anticipate being at your first duty station, consider buying. Renting is almost always more cost effective in the short-term, but the longer you stay somewhere, buying becomes more fiscally solvent because of both the tax break on the mortgage interest as well as the (expected) capital gain on the property.

I always struggled with this. How long do you consider staying in the same area to make it beneficial to buying a house? Also, with the housing market currently in the dumps, buying may not be wise for the next year or so. Hopefully, the market will rebound one year or so from now.
 
Don't know who is paying you, but I certainly have not been seeing this much increase. More like 2-4% for base pay over the past couple of years. In addition, your ASP and VSP hasn't changed since God knows when.

In fact, pay increases are not even keeping up with inflation!

He was saying add 8 to 10% to figure out 2011 pay instead of adding 2-4% then 2-4% again then 2-4% again.

For being a physician it is not financially wise to stay in the service. But how does that affect your civilian earning potential?

Say I like milmed (!!!!???) and want to stay in. How does retiring a O-5 or O-6 (big assumption of course, but let's be totally optimistic and shoot high here) affect how much you could get as a civilian physician? I know that depending on specialty, like Peds, the pay is comparable or FM.

But if you do your residency and stay in for 5 to 10 years or so, could you get a higher paycheck due to the experience being in milmed to make up for the money you missed out on while in?

(I expect no, but I might as well ask just to check)
 
I always struggled with this. How long do you consider staying in the same area to make it beneficial to buying a house? Also, with the housing market currently in the dumps, buying may not be wise for the next year or so. Hopefully, the market will rebound one year or so from now.

It's always a risk, of course, but they have online calculators that will spit out number. I believe USAA has one, if you bank with them. It can tell you down to the month how long you have to buy before it outpaces renting. You have to estimate the annual capital gain on the home, which is always tricky.

If you buy, even when it comes time to PCS, you could consider keeping the home and renting it out if it's not an opportune time to sell. There are tax breaks available if you take a loss on a rental property (assuming that the monthly rent is not enough to cover the mortgage, which it usually isn't).
 
No capital gains on sale of primary residence. There are a few limits, but if ordered to move, there is an exemption. I personally am a big fan of BAH paying for my mortgage and deducting the interest at tax time. If the property loses some value, it is a loss, but I'm also likely buying in another area of the country also with decreased real estate, so I lose in one area and get a good deal in another. But, each market is a little different. Over time all real estate goes up.

TSP is advantageous to a point. If you have good returns in IRA mutuals, that may be better. But I benefited when I was a civil servant from taking the 5% matching for 4 years. When I left for med school, I rolled the TSP into my own IRA and now the money Sam gave me is in my private IRA mutuals. When I'm done my active commitment, I'll do the same.

Staying in long term to get the permanent retirement check as an O6 and medical benefits is good for some fields, but not if you are a pediatric neuro-surgeon. As with everything, you have to do the math. Because I'm prior-service the math works well, but maybe not if I was a newbie CPT.
 
Don't know who is paying you, but I certainly have not been seeing this much increase. More like 2-4% for base pay over the past couple of years. In addition, your ASP and VSP hasn't changed since God knows when.

In fact, pay increases are not even keeping up with inflation!


In fact, military salaries have been increasing about 3.5% each year for the last couple years...multiply that times 3...and bang you have 10.5...I was being cautious by saying 8-10% increase over the next 3 years. Barely keeping up with inflation. How much have physician salaries been increasing over the same time on the outside?
 
if tsp is all or nothing (stay 20yrs or you dont get what you put in) why would the MDs do it? Most dont stay in for 20 and lose out on 64k.
 
if tsp is all or nothing (stay 20yrs or you dont get what you put in) why would the MDs do it? Most dont stay in for 20 and lose out on 64k.

The TSP isn't all or nothing. Perhaps you are thinking of the military retirement plan. I think the TSP is great even without a match. The index funds have about as low of an expense ratio one can find. I think the G fund is absoulutely wonderful bond investment. One gets intermediate term bond returns with ultra-short bond risk (which is basically zero).
 
Well, as long as we're bumping this ancient thread, here's a few tips:

1) The biggest "investing" benefit in the military is the fact that so much of your pay is tax-exempt. BAH and BAS is always tax exempt, and when you deploy your base pay and some of your medical pays are tax-exempt. (The exact amount is around $7K/month, so if you're deployed when the ASP/ISP are paid those will still be taxed. ASP/ISP payments don't have SS/medicare tax taken out of them either. So lots of tax-savings. My effective federal tax rate(not the same as marginal rate) last year with 4 deployed months was 2-3%.

2) Your first savings should go directly into a Roth IRA ($5K/year) for you and one for your spouse if you have one (another $5K/year.) You will never be in as low a tax-bracket as you are as a resident and a military staff doc so go with the Roth option whenever possible. Unfortunately, the TSP doesn't have a Roth option (or a match.)

3) Your next savings should go in the TSP. Despite your low tax bracket and the lack of a match, the tax-deferral is still an attractive option due to your long investing horizon. The TSP funds have rock-bottom expenses (0.015%, compared to Vanguard at .15% and most of the industry at 1.5%-yes that's right 100X the TSP expenses). The G fund is also a unique investment available nowhere else-intermediate treasury bond yields with money market risk-a free lunch of sorts.

4) Tax-exempt money can also be put in the TSP. This is a poor choice if you are either not maxing out your Roth IRAs or if you plan to stay for 20 years. (It turns out that a strategy using tax-efficient investments in a taxable account does better than putting tax-exempt money in the TSP for periods shorter than 20-30 years, and that is just too long.) But if you plan to bail out after your commitment, you can roll your TSP over to a Roth IRA and you won't pay tax on the tax-exempt basis-larger Roth IRA, where the tax benefits more than make up for the fact that you pay your marginal tax rate on the earnings portion of the tax-exempt TSP money.

5) When deployed, you can take advantage of the SDP. It claims you'll make 10%/year while the money is invested. It actually worked out for me to be around 9% (they don't pay on anything over $10K, so if you have over $10K in there you should withdraw it and put it elsewhere), but still very good.

6) If you're into real estate investing in another state (nearly always a dumb idea IMHO) you get a longer exemption on the capital gains tax for sale of a primary residence. I think it is 5 years rather than the 2 years most people get, but check with the IRS before quoting me. Naturally, you can write off trips back to the states "to check on your property."

7) Make sure you have as many allowances claimed on your W-4 as possible. Because the ASP and ISP are automatically taxed at 25%, your entire tax burden will probably be paid with just your ISP withholdings. Try to pay no tax throughout the year (I have two kids and legitimately claim 9 allowances), defer the ASP into the TSP, and then pay your taxes in November when the ISP is paid. You can file for your refund ~Jan 25th and have it within two weeks. This way you're only loaning the government your money for 4 months rather than 16.

8) USAA is great for insurance, banking, and even mortgages (in that order) and they are pretty good for investing, but not as good as Vanguard. Your Roth IRAs and taxable investing accounts would be best held there unless your investing plan calls for holding lots of individual stocks and/or ETFs. Then another brokerage service (Wells Fargo, Fidelity etc) would probably provide you better service and lower fees.

9) Avoid First Command. Nuff said. There is a reason military members are filing suit against them.

10) Think twice before taking your TSP money out and putting it into anything other than a Roth IRA. Is the other investment really more attractive than what you have? Probably not.

11) Take advantage of the SGLI and family SGLI. It is very cheap term insurance. But as a physician with dependents, you probably need more life insurance than $400K. If you do, go to term4sale.com and follow directions. Don't buy any life insurance that is any more complicated than 20 or 30 year level term insurance. Just say no to variable life, universal life, and whole life. If it has the word annuity in it, you don't want it (at this stage of your life. Immediate annuities have some benefits at the other end of your career.)

12) If you need help understanding mortgages, go to mortgageprofessor.com and spend a few hours learning. No one will teach you that stuff in school. And don't fall for the "doctor loan" line. No one is lining up to help doctors out. They'll give you a loan all right, but they'll make the money back with a higher rate, more points, or higher fees compared to a traditional loan. Put 20% down and get the right mortgage for you. If you can't come up with 20% down there's a good chance you'll be better off renting.

13) Moonlight. Sometimes it is easier to boost your earnings by 10% than to cut your spending by 5%. Nothing wrong with that.

14) Stock brokers, insurance salesmen, and most financial advisors service you the same way Bonnie and Clyde serviced banks.

15) Do yourself a favor and read ONE good financial book during your medical school or residency. Here's a list of some of the good ones out there:

1) The Boglehead's Guide to Investing
2) The Coffeehouse Investor (the shortest, easiest one to read)
3) The Only Investment Guide You'll Ever Need
4) The Only Guide to a Winning Investment Strategy You'll Ever Need
5) Straight Talk On Investing: What you Need to Know
6) The Little Book of Common Sense Investing

16) If you're lucky enough to get deferred for civilian residency, pick up some specialty-specific disability insurance. It will still be good while you're on active duty but you won't be able to buy anymore.

17) Save money. Aim for 10-30% of your gross income (I saved 44% last year). Live like a resident for just a few more years. You'll be glad you did. I lived on ~36K/year as a resident and now make 3 times that. Sure you can increase your lifestyle a bit, but don't triple it. Remember that you can't afford the things that a non-military doc in your specialty can. Remember that not only will you not get a decent retirement from the military (because you probably won't stay 20 and even if you do you only get 50% of 50% of your pay since medical special pays, BAH, and BAS don't count toward retirement) but you don't get a match either unlike federal employees. You need to make up for these losses by saving more.

Nobody cares about your money like you do. If I think of any more tips I'll post them here.
 
I would still recommend Vanguard over all of them though. By far the cheapist way to go and least expensive to operate year after year.

For you reservists that actually haven't lost your practice due to deployments, or you are in a small group. Consider getting a $4000.00 deductable health care plan then get an HSA. You can invest the HSA contributions, they're tax free, and if you don't use them for health care, you can draw them out I think at age 60 and they'll be taxed like a regular IRA.

Doctors have a unique advantage with an HSA because they can probably get an office buddy to treat them and their families for the nickle and dime stuff and really don't need to let an HMO shake you down every month, just for the privilage of getting the kid's diaper rash treated . While it's true, your income may eventually push you out of eligibity for many of these programs, a lot of you will qualifty, especially if you're working in some socialist utopia like Vermont make squat as an F.P.

You have to consider what a rip off some 401K can be. They charge 2 or more percent management fees and it's really hard to get your money out in an emergency where as with the Roth it's not as hard.

Between you, your wife, and the HSA, that's somewhere near $1300.00 monthly you can sock away with little or no tax liablity using after tax dollars.

And oh yeah, you're actually going to trust the army with your thrift money ? They can't even resist the urge to stop loss you pass your ADSO, and you want to hand over your hard earned money to them for self keeping ?
 
I would also consider the concept of " It's not what you make, it's what you spend"

I suggest www.daveramsey.com and his cable news show I think of Fox Finance channel.

You're a doctor and an officer and you think you're so smart ? Why did you go out and buy a brand new BMW 5 minutes after your first assignment in Germany that will lose 1/2 it's value by the time you get back from Iraq via Germany ? Yep, I used to see that ALL the time.
 
I would still recommend Vanguard over all of them though. By far the cheapist way to go and least expensive to operate year after year.

For you reservists that actually haven't lost your practice due to deployments, or you are in a small group. Consider getting a $4000.00 deductable health care plan then get an HSA. You can invest the HSA contributions, they're tax free, and if you don't use them for health care, you can draw them out I think at age 60 and they'll be taxed like a regular IRA.

Doctors have a unique advantage with an HSA because they can probably get an office buddy to treat them and their families for the nickle and dime stuff and really don't need to let an HMO shake you down every month, just for the privilage of getting the kid's diaper rash treated . While it's true, your income may eventually push you out of eligibity for many of these programs, a lot of you will qualifty, especially if you're working in some socialist utopia like Vermont make squat as an F.P.

You have to consider what a rip off some 401K can be. They charge 2 or more percent management fees and it's really hard to get your money out in an emergency where as with the Roth it's not as hard.

Between you, your wife, and the HSA, that's somewhere near $1300.00 monthly you can sock away with little or no tax liablity using after tax dollars.

And oh yeah, you're actually going to trust the army with your thrift money ? They can't even resist the urge to stop loss you pass your ADSO, and you want to hand over your hard earned money to them for self keeping ?

Let's see if I can address a few of the misconceptions here.

1) Vanguard is not cheaper than the TSP. In some cases, it is ten times as expensive with higher minimums. Consider the I fund (ER 0.015) and the Vanguard Developed Markets Index Fund (ER 0.22). Both invest in the same companies and track the same index. But one is over ten times cheaper than the other. I love Vanguard, but the TSP funds are even better. Vanguard's mutual funds are extremely low cost, but its brokerage service is frequently complained about even by Vanguard diehards. The commissions are much higher than can be found elsewhere. I suspect this is because they prefer to stick with their area of expertise (low-cost mutual funds) rather than grow the brokerage business (which doesn't benefit Vanguard's owners, which are the owners of its mutual fund shares-you and I).

2) Bear in mind that active duty docs can't do an HSA (you implied this but didn't specifically state it.) You have to have a high deductible health plan to do an HSA (which tricare is not.) Those who can do an HSA shouldn't actually spend it on health care (although you should max it out). Spend your regular earnings and use the HSA as an extra IRA.

3) Many docs wouldn't consider doing a high deductible health plan/Health savings account because they actually have very good health insurance provided by their employer instead. But I suppose if you're buying it yourself, it's your decision.

4) Many 401Ks (not the TSP) are a huge rip-off not only because they offer loaded funds (ugh) and high-ER funds (ugh ugh) but also because there are often hidden fees in addition to these. It really pays to read your 401K documents and understand all the fees. It also pays to lobby your employer to provide a good 401K. Even if you have a truly awful 401K, you want to make sure you contribute enough to get the maximum match (free money). If fees are greater than 1.5-2%, you're probably better off investing tax-efficiently in a taxable account than that 401K (after the match of course), unless you anticipate leaving the job within 5-10 years when you could roll the money into an IRA.

5) The TSP isn't managed by the army. In fact, its independent board of directors is perhaps the most highly watched in the world. They do an exemplary job of consistently lowering expenses, not performance chasing by adding the latest hot asset class, and cutting down on transaction costs caused by frequent trading. If you really don't trust the TSP, you can always roll it over to an IRA when you leave the service, which is usually pretty quickly for most of us. In fact, if you stuffed a lot of tax-exempt money in there, you may be able to do a pretty low cost Roth IRA rollover the year you leave service.

6) Can you name any docs that have been stop-lossed in the last ten years? I can't and I've been hanging around this forum for 8 or 9. I'd think if someone had been stop-lossed, someone here would know about it. Military medicine is bad enough without making up new problems. Not to say it couldn't happen, but I don't think it has happened yet.
 
Let's see if I can address a few of the misconceptions here.

1) Vanguard is not cheaper than the TSP. In some cases, it is ten times as expensive with higher minimums. Consider the I fund (ER 0.015) and the Vanguard Developed Markets Index Fund (ER 0.22). Both invest in the same companies and track the same index. But one is over ten times cheaper than the other. I love Vanguard, but the TSP funds are even better. Vanguard's mutual funds are extremely low cost, but its brokerage service is frequently complained about even by Vanguard diehards. The commissions are much higher than can be found elsewhere. I suspect this is because they prefer to stick with their area of expertise (low-cost mutual funds) rather than grow the brokerage business (which doesn't benefit Vanguard's owners, which are the owners of its mutual fund shares-you and I).

2) Bear in mind that active duty docs can't do an HSA (you implied this but didn't specifically state it.) You have to have a high deductible health plan to do an HSA (which tricare is not.) Those who can do an HSA shouldn't actually spend it on health care (although you should max it out). Spend your regular earnings and use the HSA as an extra IRA.

3) Many docs wouldn't consider doing a high deductible health plan/Health savings account because they actually have very good health insurance provided by their employer instead. But I suppose if you're buying it yourself, it's your decision.

4) Many 401Ks (not the TSP) are a huge rip-off not only because they offer loaded funds (ugh) and high-ER funds (ugh ugh) but also because there are often hidden fees in addition to these. It really pays to read your 401K documents and understand all the fees. It also pays to lobby your employer to provide a good 401K. Even if you have a truly awful 401K, you want to make sure you contribute enough to get the maximum match (free money). If fees are greater than 1.5-2%, you're probably better off investing tax-efficiently in a taxable account than that 401K (after the match of course), unless you anticipate leaving the job within 5-10 years when you could roll the money into an IRA.

5) The TSP isn't managed by the army. In fact, its independent board of directors is perhaps the most highly watched in the world. They do an exemplary job of consistently lowering expenses, not performance chasing by adding the latest hot asset class, and cutting down on transaction costs caused by frequent trading. If you really don't trust the TSP, you can always roll it over to an IRA when you leave the service, which is usually pretty quickly for most of us. In fact, if you stuffed a lot of tax-exempt money in there, you may be able to do a pretty low cost Roth IRA rollover the year you leave service.

6) Can you name any docs that have been stop-lossed in the last ten years? I can't and I've been hanging around this forum for 8 or 9. I'd think if someone had been stop-lossed, someone here would know about it. Military medicine is bad enough without making up new problems. Not to say it couldn't happen, but I don't think it has happened yet.


I don't know what happened to the lot of docs and dentists I was sitting out in the desert at NTC in 2003 getting ready for SWA, but they were organic to the unit, I was profis and their *** was going, no two ways about it. I got out of it, so I doubt they were able to get out. You are looking at life from the PROFIS side of the house.

The way they're training you guys these days are to be the perfect little HMO worker ant. It doesn't have to be that way, particullarly with the growing trend in concierge medical care.

I work in a town of about 40,000 people and a good many of the docs have to carry their own medical insurance and it's going to get worse, before it gets better. If you've got maybe 10 people in the group including support staff and you apply for a group plan, I promise you, you're going to be reviewed for pre-existent illness with a fine tooth comb before they issue the policy. Unless you're IBM, you're not going to get a break.

Realize that you will NEVER pay less tax in your life than you are paying right now. This whole deferred tax is a scam. Do you really think these retiring baby boomers are going to let you off the hook ? The average boomer has saved less than 60,000 at the time of retirement. They're bums and they're going to expect you and I to carry them and after the summer of love, they're ate up with Hep C, diabetes, and other diseases of the self-indulgent life they've lead since 1945.

Wells fargo brokerage gives you 100 FREE trades a year. Also, while it's true, Vanguard has some higher fees, but those are often overseas funds, which of course are higher.

If you don't start thinking like a civilian NOW, you aren't going to be ready when it happens. That's the whole idea, they want you fully institutionalized and dependent. I've got a friend that just retired. He's clueless, he did 20 , his daddy did 20. This poor bastard had the deer in the headlights look when I told him he's working through lunch, he can't leave at 4 pm to go to the gym, and oh yes, he WILL be fired if he doesn't start working his *** of and get his numbers up.
 
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