Reaching financial independence while serving in the Air Force is entirely possible, and Spencer from Military Money Manual is a great example of how to achieve this by the age of 40 using military pay and benefits.
The idea of achieving financial independence isn’t just for high-earning professionals. If you’re in the U.S. armed forces, you’re in a uniquely advantageous position to work towards this goal.
Military service has its challenges—constant deployments, temporary duty assignments (TDYs), separation from family, lower pay, demanding hours, and sometimes harsh conditions. Despite these hurdles, you can leverage your time in the service to save and invest wisely, thanks to the benefits available to you.
Even though serving 20 years to earn a military pension is one route to financial independence, only a small fraction of servicemembers reach that milestone. However, there are other effective strategies to consider:
1. Deployments and TDYs: Deployments can significantly bolster your financial standing. During these times, your essential expenses like housing and food are covered, and your income is higher due to various allowances. Additionally, your deployment income is tax-free. This period is ideal for maximizing contributions to Roth TSP and Roth IRA, ensuring your untaxed income remains tax-free for the future. Similarly, TDY assignments often come with per diem rates that exceed actual expenses, offering another chance to save and invest effectively.
2. Unique Military Investments: As a servicemember, you have access to investment opportunities that civilians do not. The Savings Deposit Program (SDP), available during deployments, offers a guaranteed 10% annual return on up to $10,000. Additionally, you can contribute to the Thrift Savings Plan (TSP), which comes in Roth and Traditional forms. The Roth TSP is particularly beneficial for deployed personnel due to the tax-free growth on contributions made from tax-free deployment income. The TSP also features extremely low cost funds, much lower than even Vanguard.
3. Military Education Benefits: The military offers several education benefits that can further aid in financial independence. These include the Montgomery GI Bill, Post-9/11 GI Bill, Tuition Assistance, and various programs through ROTC, military academies, or loan repayment programs. These benefits can cover a wide range of educational expenses, provide housing stipends, and offer financial support while on active duty. Taking advantage of these benefits can set you up for a successful career both within and outside the military.
Achieving financial independence before reaching the 20-year service mark is very achievable. Using military benefits effectively can help you live a financially stable and fulfilling life. For instance, Spencer has managed to minimize his debt through ROTC benefits, save considerable tax-free income during deployments, and maximize his Roth TSP contributions. By planning strategically, you can set yourself up for a lifetime of financial freedom.