A Retirement Marathon

If you’re up for the challenge, you can get a head start on long-term financial security from the minute you join the armed forces. The key is having the discipline to save part of your pay every month—right from the beginning—and for as long as you stay in the service.

GETTING IN SHAPE

To be competitive in any race, you need to be in great shape physically and mentally. In a retirement savings marathon, it’s the mental conditioning that’s critical. You have to resist the impulse to buy extra things you’d like to have now to gain something you’ll absolutely need later. It’s a trade-off that gives you an extra edge, especially down the home stretch.

If you’re burdened by debt, saving is almost impossible and you’ll find yourself lagging behind. But if the money you’re paying in interest on credit cards and loans can go into savings instead, you’ll be prepared for the long run.

There’s just one good reason to postpone saving for a long-term goal, including retirement. That’s using some of your income first to build an emergency fund large enough to cover three to six months worth of living expenses. It’s like having disaster insurance for your financial security.

ON YOUR MARK

All successful competitors have a strategy for reaching their goals and a commitment to seizing every opportunity to get ahead.

For retirement savers, the big opportunity is access to an employer’s tax-deferred savings plan that lets you postpone taxes on your earnings. That means your account can compound faster.

There are other routes to the goal, such as a tax-deferred individual retirement account (IRA). But for getting off to a fast start, an employer plan is the way to go.

GET SET, GO

You might hesitate to put money into a retirement savings plan when you’re already stretching to cover expenses like supporting a family, buying a home, or keeping up-to-date with your bills.

One approach to paying current costs while saving for the future is to dedicate a percentage of your current income to both short-term and long-term goals. In a perfect world that would be 10% or more, but saving 5% is better than nothing. You can always increase the percentage later on as you’re promoted and your income rises.

For short-term savings, you can consider insured accounts, such as certificates of deposit (CDs). Long-term savings, on the other hand, are generally better off in investment accounts that have the potential to grow substantially over time, even if they may sometimes lose value, especially in the short term.

HITTING YOUR STRIDE

If you start your savings regime early and make a habit of saving during your career, your progress toward accumulating substantial assets should be right on track.

Sooner or later demands on your current income will begin to ease, at least somewhat. The mortgage may be mostly or fully paid off, and your children will strike out on their own. You’re likely to be earning more. That means you can gradually contribute a higher percentage to your long-term account through your employer’s plan, your own IRA, and other investments you might make.

In fact, the retirement system is set up so that once you turn 50, you qualify to make larger contributions to tax-deferred accounts, whether you spend your entire career in the military or transition to civilian life and participate in a new employer’s plan.