Investment Considerations for Military Retirees



Hey! Welcome to April! Here in South Carolina, we seem to finally be turning to spring.  We actually have sun instead of the constant rain of the last 6 months.  Be careful what you wish for right?

Again, I’m Derek Merkler and in this tip of the week I’m addressing a question sent to me on LinkedIn. This person was asking about a proper investment strategy for veterans that retire from the military but then continue on in a second career for 15 to 20 years or more.

First, the question is somewhat generic.  Investment allocation and strategy should always be dictated by a financial plan, I don’t know if I can say that enough, and that plan should answer the question of where one is today, where one is trying to go, and what one must do to get there.  While I can read between the lines of the original question, it’s important to note that many other important life events can happen between military retirement and full retirement.  Paying for college, or weddings, or a new car, or a new house are all relevant examples that could change the approach for a given individual or family.  And that’s ignoring where they are at to start.

Anyway, I’ll assume that the question revolves around investing for retirement.  So even here, we have to consider the financial plan and the returns that are needed to accomplish those goals.  So the first factor to consider is the time horizon. With 15 to 20 years until full retirement, one would think the investment time horizon is 15 to 20 years. But it is not.  At retirement, we don’t sell all of our investments and put them into a checking account.  Well… we could, but we’d virtually guarantee ourselves a declining standard of living in retirement… and a huge tax bill.

Instead, a retirement starting in one’s 60s will often lead to at least one member of a married couple living until the mid-80s.  Going forward, I think it’s going to be more and more common for people to live into their 90s and low 100s.  So… if someone retires at 65 and that’s 20 years from now, the actual investment horizon is likely at least 40 years and possibly 60 or more by the time we actually get there.

Therefore, an investment strategy, though it may change over time, should be focused on funding that long retirement.  And that long-term time horizon comes with another lovely challenge… inflation.  You see, even at the historical average inflation rate of 3%, the cost of living will triple in that 40 year time horizon. At 60 years it will sextuple. Yeah I had to look that word up.  It means six times.

So we need investments that will grow our wealth to fund a long retirement AND at least match inflation over that time period.  And my starting point to solve this problem is an internationally diversified portfolio of stocks.  There are plenty of ways to build that portfolio, including using a robo advisor like Schwab Intelligent Portfolios or Betterment.  Or you can do it yourself. Or you can hire someone.

Depending on the details of the plan and other objectives, I might add in a momentum or trend following strategy as well… but it would complement rather than replace the base portfolio of stocks.

Are stocks the only way to get there? Of course not.  But that is the type of investment that, historically, has grown wealth greater than the rate of inflation over the long-term while offering daily liquidity and minimal distraction from career and family.  A rental real estate business could be a great option.  Any successful business is a great option. Those are investments as well.

Ultimately, one can take many pathways to accomplish their goals.  There is more than one answer.  But there are wrongs answers, too.  A savings account probably won’t work.

Thanks for watching the video, if you have questions on this or any other financial topic, or if you want to work with me to develop your financial plan, send me a message using the info posted in the credits.  See you next time!


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Remember, the topics discussed in this video are for informational purposes only and that past results do not guarantee future performance. If you would like to discuss your financial situation, please email me at 

Advisory services offered through Parsonex Advisory Services, Inc., 8310 S.Valley Hwy, Suite 110, Englewood, CO 80112. 303-662-8700.


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