investing

Q&A: How to Get an Early Investing Start

Kim Lankford recommends a simple investing plan for one young soldier stationed in Iraq.

Q: My son is in the Army inIraq. He has no investmentsto speak of and issingle. He wants to putmuch of his income intosome form of investment,most likely a mutual fund.Do you have any advice forhim for selecting a fund?

The easiest way for him toget started is to invest inthe Thrift Savings Plan, andhe can open an accounteven while he is deployed.

All he has to do is sign upto have a percentage ofeach paycheck go directlyinto the TSP. Troops cangenerally contribute up to$16,500 to the Thrift SavingsPlan in 2009. But yourson can also contribute allof his tax-exempt combatzonepay, as long as his totalcontributions for the yeardon't exceed $49,000.

He can start very small -- theminimum contribution isjust 1% of basic pay eachperiod -- but you shouldencourage him to set asideas much as he can.

The simplest investmentchoice is a lifecycle fund(the L Fund in the TSP).Lifecycle funds -- sometimescalled target-datefunds -- invest in a portfolioof other funds based onan investing time frame.

They start out with moremoney invested in stockfunds -- when you havemany years before you planto touch the money -- thengradually become moreconservative as your goalsget closer.

The lifecycle fund automatically adjuststhe investments every quarter,so you don't need tomake any changes yourself.You should pick thelifecycle fund with a targetdate closest to whenyou plan to withdraw themoney.

If your son is in histwenties and doesn't planon tapping the accountuntil he's in his fifties, thenhe'd pick the L 2040 fund.This fund starts with mostof its money invested inan S&P 500 index fund(large U.S. companies),followed by an allocation tothe international fund andsmall-company index fund,and just 15% of the moneyin the fixed-income fund.

The allocation graduallychanges through time, withmost money invested in thegovernment securities fundby 2040. Visit the L Fundspage at www.tsp.gov to seehow the allocation becomes more conservative as time passes.

MAIN: PERSONAL FINANCE GUIDE FOR MILITARY FAMILIES

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Calculate the Break-Even Age for Taking Social Security
social security

How to Calculate the Break-Even Age for Taking Social Security

When it comes to maximizing your Social Security benefits, there are many elements to consider. One factor that can be especially enlightening is your…
August 30, 2021
Spend Without Worry in Retirement
Financial Planning

Spend Without Worry in Retirement

Fears of running out of money prevent many retirees from tapping the nest egg they’ve worked a lifetime to save. With these strategies, you can genera…
August 30, 2021

Recommended

Is a Target Date Fund Right for You?
investing

Is a Target Date Fund Right for You?

You're busy, and poring over investments is a pain. Wouldn't a target date fund be easier? Take a look at their pros and cons to see if incorporating …
September 14, 2021
Water Investing: 5 Funds You Should Tap
ETFs

Water Investing: 5 Funds You Should Tap

As the importance of water sustainability becomes ever more apparent, so too do the potential rewards of investing in water.
September 10, 2021
Is the Stock Market Closed on Labor Day?
Markets

Is the Stock Market Closed on Labor Day?

Stock markets and bond markets alike will enjoy their annual three-day weekend as America observes Labor Day.
September 5, 2021
10 Terrific Retirement Funds That Tackle Every Need
mutual funds

10 Terrific Retirement Funds That Tackle Every Need

Retirees and those nearing the end of their careers must consider growth, income and safety for their investments. Here are 10 mutual funds and ETFs t…
September 3, 2021