Investing in your future

Commentary by Lt. Col. James Duke, 60th Civil Engineering Squadron

Commentary by Lt. Col. James Duke, 60th Civil Engineering Squadron

TRAVIS AIR FORCE BASE, Calif. – Compounding interest. Stocks. Mutual funds. Individual Retirement Accounts. 401K. Retirement plans. I hope your eyes haven’t glazed over. The preceding words mean something. They mean being better prepared for your future than the vast majority of your peers. Financial independence and peace of mind are your rewards, but you won’t get there unless you start looking. The “buzz” words of investing in your future by having a fitness plan come to mind, but just as important is to realize the earlier you start, the better off you are.


Dave Ramsey said, “Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.” 


You could make $200,000 per year, but if you end up spending $205,000 per year, you’ll still go broke. Even though Military Saves Week ended last month, we are getting close to the tax filing deadline and many people will be getting a tax refund. Have you thought about investing instead of spending it on some gadget? In addition, the decision point to decide whether to join the new Blended Retirement System is approaching and all your financial tools are needed to make an informed decision.


Compounding interest is the term used on interest that is calculated not only on the initial amount, but also on the previous interest. Although it may start out slow, over time, it will pick up. For instance, if you put $100 per month in a zero-interest savings account, after 20 years you would have $24,000. If you invested that same $100 per month at 6 percent interest compounded annually, you would end up with $44,000. I didn’t start investing until I was 26. I wish someone had told me when I was 18 to start investing what little I had. Compounding works and the earlier you start, the greater benefits you receive. 


Stocks are shares of a company that the public may own. The value of stocks swing high and low depending on what others think the company is going to do and be worth in the future. Will it be the new tech genius or the old Enron? It’s a gamble, and I only recommend owning stocks after you’ve become a little savvy in the market. However, there is a way to own stocks while lowering your risk. That’s through mutual funds. Mutual funds are a bunch of individual stocks wrapped up into a larger grouping. Someone else runs the funds and you invest in what you think your risks are. Aggressive funds typically have higher risk. Other funds may have safer strategies and thus lower risks. You decide what risk you have, and there are literally thousands of mutual funds to choose from. 


An IRA can be a lot like a mutual fund. A traditional IRA allows you to reduce taxes now, but you’ll have to pay them in the future when you withdraw. Normally any dividend (profit sharing by the company) or increase in price incurs a taxation. This is not so with the Roth IRA. In this case, your investment grows as high as it wants but when you withdraw it (after age 60) there are no taxes on the dividends or monetary gain. You can withdraw some money before 60, but there may be stiff penalties. A 401K is similar, but the company you work for can also match some of your contributions. A 401K can typically be transferred from company to company when you change jobs. The new Blended Retirement System is very similar to a 401K and can be a part of your investment decisions.


I only gave you a quick summary of a few investment ideas to chew on. My intent is not for you to throw money around but to sit back and really think about your future and ultimately your retirement (from the military and from the overall work force). I want each of you to be able to set a plan in motion that will leave you in financial peace so you don’t have to worry about money in the future. 


The Airmen and Family Readiness Center has many classes and pamphlets on financial matters, including investing.  I urge you to make the trip there and see what they have. Stew on it for a week or a month, but always come back to it and see if you can start with $1 per month today. You future retirement may depend on it.