After the TSP, I invest my money in Betterment and Vanguard. I track all of my investments with Personal Capital. I also wrote a short, 2 hour book summarizing this site. You can buy it here.
Let me start off by saying I am not enlisted. I asked around and did the best research I could to calculate average enlisted pay, but its not easy. Every case will be different, with different deployment cycles, special pays, spouse income, and whether or not you live on base.
I’ve experienced the officer side of life for a few years now so I can write from personal experience. For the enlisted side, I can only ask questions, look at the pay charts and educate myself, but I can’t live it.
Just like on the officer side, an enlisted person is definitely worth more than their investable assets. You can be the best technician at your job or leader on and off duty and still be drowning in credit card debt.
Usually though, if you excel at your job, you will also want to excel in all aspects of your life. In this article I’ll lay out what the above average enlisted personnel should have saved throughout their career.
The above average enlisted man/woman knows:
- That the TSP is the best investment vehicle for their retirement
Tracking your investments with Personal Capital makes it easy to see all your accounts in one place
- That banking with a military friendly bank or credit union like USAA saves both money and time
- Not to completely rely on a military pension, because less than 20% of active duty personnel make it the full 20 years
- You are more financially savvy than your peers and you didn’t buy that brand new Ford F-150 with a high interest rate at the lot right off base/post.
- You understand that power of compounding interest, simple index investing, and spending less than you earn
- You never carry a balance on your credit card, but you do use a cashback credit card to get the most for your purchases
- This chart is for single airmen, soldiers, sailors, and marines. If your spouse works, your total net worth or your standard of living should be higher.
- In this chart I assumed that you prioritize your tax advantaged retirement investments, like the Roth IRA and Roth TSP. Once you have enough income to start making taxable investments, you start doing that as well.
- I assumed a 4% investment return, which is a bit low considering the stock market averages 6-7% in the long run (30+ years).
- I also assumed that you wait until you make E-6 to buy a house and then you build $500/month of equity
The Average Net Worth for the Above Average Soldier, Sailor, Airmen, or Marine
|Age||Rank||Roth IRA||Roth TSP||Taxable Investments||Home Equity||Total NW|
- As a young enlisted member (E-2 and E-3), focus on becoming the best you can at your job, continuing your education, staying out of debt, and building an emergency fund. Start contributing between $400-500/month to your Roth TSP account. As you reach the NCO level, keep increasing your savings every year.
- Congratulations on the promotion to E-4 (Senior Airman, Corporal, or Petty Officer Third Class)! You should start contributing more to your Roth TSP account with your increased pay. After wearing your new stripes for a few years, you should be maximizing your Roth TSP contributions and begin contributing to your Roth IRA.
- By the time you have been an E-5 (Staff Sergeant, Sergeant, or Petty Officer Second Class) for a few years, you should be able to maximize your Roth TSP and Roth IRA investments. This is where your hard work and savings should pay off with a net worth of over $100,000.
- By the time you make E-6 (Technical Sergeant, Staff Sergeant, or Petty Officer First Class) you should have enough income to not only maximize your tax advantaged investments (Roth IRA and Roth TSP), but also start investing in taxable investments. Towards the end of your E-6 time you will rapidly approach the half million dollar mark.
- As you approach retirement as an E-7 (Master Sergeant, Sergeant First Class, or Chief Petty Officer), your hard work and slow but steady investing pace has built a nest egg of over $700,000. You should be able to safely withdraw $22,000-$30,000/year for the rest of your life from this fund in addition to your military pension.
I need your feedback!
- Do you think these numbers are attainable?
- Where do you fall in the list?
- Do you think you could really have over $700,000+ saved at the end of your 20 year career?
- Do you think a young NCO can save up a six figure net worth?
- Leave a comment and share this post with your friends!
2 Websites I Use to Achieve Financial Independence Faster
I have investment accounts all over the place. To keep track of all of them in one place I use Personal Capital. It combines all of my accounts, shows me where I may be overpaying in fees, and provides beautiful charts showing my overall asset allocation and performance.
I use Personal Capital to track my Roth and Traditional TSP, Vanguard IRAs, banking accounts, SDP, and my Betterment taxable account, all in one place. It's free, secure and presents me with a one-stop dashboard so I can see all my money on one site.
Read my full review of Personal Capital and see how easy it can be to manage your investments in one place. Trust me, once you try it, you'll love it.
P.S. - If you have over $100,000 of assets and a 401k, you really need to run the Personal Capital 401k Fee Analyzer.
The best way I know to achieve financial independence is to keep your investments simple, diversified, automatic, and low-cost. Costs eat into your returns like you wouldn't believe! A 1% difference in expense ratios can mean $100,000s lost to fees over a lifetime of investing.
Even if you're a DIY (do-it-yourself) investor like I am, you need to check out Betterment. You can read my full review here, but the bottom line is for only $250 per $100,000 invested (0.25% expense ratio) you get simple, diversified, and automated investing. In addition every account now gets free Tax Loss Harvesting+ features, which should increase returns for the average investor more than the minuscule management fee.
If you're not a DIY investor or are just getting started with investing, then you definitely need to check out Betterment. It's what I recommend to my family and friends who aren't strong investors or don't care to learn about asset allocations, diversification, or rebalancing.