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Filling your retirement war chest doesn't have to be a gamble

Mar. 15, 2012 - 06:46PM   |   Last Updated: Mar. 15, 2012 - 06:46PM  |  
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It all adds up

Over the past four decades, anyone who has invested in the group of companies making up the Dow Jones Industrial Average has earned an average of about $1 a year for every $10 invested. Some mutual funds have done much better, but even the mediocre funds have tended to earn at least 6 percent annually. So, with that as a marker, here’s what someone starting at the beginning of a 30-year career could earn if they invested wisely:
• A $10,000 enlistment bonus invested in a mutual fund with an annual average return of 6 percent will grow into more than $57,000 by the end of a 30-year career.
• $500 invested monthly into an account averaging 6 percent annually will top $500,000 within 30 years.
• $675 invested monthly into an account averaging 8 percent annually will clear $1 million within 30 years.
• $450 invested monthly into an account averaging 10 percent annually will hit $1 million within 30 years.
You can find investment calculators all over the Web. We used the investing calculator at

How to start

Sure, some people get lucky, but most don’t. If you want to retire with financial independence, according to Navy retiree and military millionaire Greg Nordman:
• First, track expenses and get a solid understanding of where your money is going.
• Next, develop a spending plan that allows you to save and invest part of every paycheck.
• Finally, learn as much as you can about money management, as well as how to fix things on your own. Hobbies such as auto care and home fix-it know-how pay immediate dividends and long-term returns when that money is invested instead.

Who doesn't want to be a millionaire? Dreams about getting rich often play out much like what happened to Marine Cpl. Alexander Degenhardt.

A few weeks ago, during a break from training at Nellis Air Force Base, Nev., Degenhardt headed to the Las Vegas Strip. After a few minutes at a penny slot machine, he was down about $10.

Then the lights began flashing.

"Dude, what does that mean?" he asked his buddy.

It didn't take long to find out. He'd hit the jackpot: $2,882,808.32.

For many, the idea of becoming a millionaire while in the military may seem as unlikely as winning big in Vegas. And considering the economy these days, breaking into the millionaire's club the old-fashioned way saving and investing may feel just as risky.

Even in the best of times, conventional wisdom has held that "retiring" from the military simply means starting a second career.

Digging your ditch

But don't tell that to Jeff McClure. An armored cavalry officer-turned-financial adviser near Fort Hood, Texas, McClure manages more than $100 million for his clients, dozens of whom are military millionaires.

"That old cadence line ‘You'll never get rich, digging a ditch, you're in the Army now' it isn't true," McClure says.

Since starting his practice about 30 years ago, McClure has seen firsthand the fortunes those on active duty can amass. The common thread: They started saving and investing early.

Among the strategies he and other financial experts have seen work time and again:

Invest every pay period. Whether it's a fixed amount or a percentage of your base pay, the single biggest key is making consistent deposits into investments.

Bank promotions. If you're making do with the salary you're earning now, consider the financial windfall you'll enjoy down the road if you put the money you make with every promotion into investments.

Sock away bonuses. Bonus money can provide an even fatter nest egg especially if it's earned tax-free while serving in a combat zone. A $10,000 bonus can more than triple in 20 years, even in a modest investment.

Save strategically. Finding specific ways to cut costs now can turn into big savings over the long haul.

"The ones who do things like this learn to live on a lesser standard of living now will have a heck of a lot of money in the future," McClure says. "But you have to have the discipline. It's like quitting smoking: The earlier you get on with it, the better off you'll be."

One of his clients decided as a young lieutenant to invest $400 "into a mediocre diversified mutual fund every month, come hell or high water," McClure says. That soldier, now a one-star general, has accumulated enough in that one investment to more than provide for him to leave the military without worrying about money ever again.

"The trick is you have to be willing to tolerate the ups and downs," McClure says. "Over the past 40 years, there have been four 50 percent drops in the market. Each time it has recovered, but people either get scared and end up buying high and selling low, or too greedy and start taking risks they shouldn't."

Strategic sacrifices

Former Army grunt and Iraq veteran Michael Hamlin interviewed a slew of military money wizards for his new book, "Military Millionaires."

"Serving in the U.S. military, especially at an early age, can be the financial opportunity of a lifetime," Hamlin says.

That's if you play your cards right and not at the Bellagio says Hamlin, who has a degree in finance and manages a Veterans Affairs Department vet center in Michigan.

Hamlin likes to tell the story of his sergeant major while he was deployed to Iraq in 2006.

After 30 years in the military, the hard-charging noncommissioned officer had resisted charging hard on credit cards. His simple $200-a-month investment strategy as a young private grew with each promotion until he amassed a retirement war chest of more than half a million dollars.

"Yes, I made some sacrifices along the way," he remembers the 48-year-old infantryman telling him. Among them: always eating in a chow hall or packing a lunch. By his calculation, that tactic alone put more than $90,000 into his coffers.

That kind of financial foresight stood in stark contrast to the approach of many of Halmin's friends, who were barely scraping by after lavish car purchases and other big buys.

Other money minefields were less obvious. One military friend opened a stock trading account before losing thousands to quick-hit buy-and-sell strategies.

"Some professionals can do things like day trading, but for most it's really just another form of gambling," Hamlin says.

Surf's up

With the rolling waves of the up-and-down stock market in recent years, some may have waved off investing. But don't try to tell retired Lt. Cmdr. Doug Nordman that a tough economy is holding you back.

He was already a military millionaire as he was getting ready to retire from the Navy about 10 years ago. He and his wife, who was also in the Navy, had carefully scrimped, saved and invested for about 10 years before their account balance tripped the million-dollar mark.

Then 9/11 hit, and the economy tanked along with many of their investments. But because he had studied the markets, Nordman knew things would rebound.

A year later, he was still driving a beat-up old car he'd had for more than decade, but he spent the first day of his retirement without too many worries, learning how to surf in his adopted home of Hawaii and with more than a million dollars to his name.

"The best way to do what I did is to live below your means and save ferociously. It's not necessarily easy, but you don't have to be a brilliant investor, either," says Nordman, author of "The Military Guide to Financial Independence and Retirement."

Degenhardt, the Marine corporal, says he knows he got lucky. But he doesn't intend to press his luck. He plans to use his Vegas windfall to help his mother and sister pay off bills.

After just re-enlisting in the Corps, he says he's not ready for early retirement and isn't even planning to put his old car out to pasture despite the 250,000 miles on the odometer.

"I plan to keep driving it until I can't anymore," he says. "No sense in wasting money. I'm really pretty thrifty."

He did, however, buy some new threads at a thrift store, where he's always bought his clothes.

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