How a small investment decision can turn your life around

I had an adversity to taking risk over the tradeoff of reward. I tended to choose very conservative investments not allowing my money to grow. Once I took inflation and taxes into account I was not beating inflation and didn’t think I would ever be able to retire.

Historically treasury bills average annual return is 2.4% which does not outpace inflation and I actually lost because I didn’t even taken taxes into account. My savings was primarily in credit union savings account and CDs. When I really should have been investing in more aggressive funds, especially when I was younger. So I started doing my homework well into my forties, hopefully, you are much younger than me and can start getting ahead of inflation now. Even if not, its never to old and there is some risk you still can manage.

Let’s look at some low risk investments. Of course, savings account are low risk and based on compound interest averaging 1-1.5% annually means it would take over 68 years to double your investment. Money market accounts may offer a little higher interest rate but they come with more restrictions than savings. These can be protected by Federal Deposit Insurance Corporation FDIC or National Credit Union Administration NCUA insurance for balances up to $250,000 (make sure your bank is protected). There is a bank product called a money market mutual fund available but these are not protected by insurance. Although CDs may yield higher rates of return in comparison to savings or money market account they are deposits with strings attached like time and amount that drive interest rate contracted. Bank CDs are insured but if sold by a brokerage firm they may not be so just be aware.

U.S. Treasury Securities are still considered more conservative because the government is not likely going to default on the loan and the rate of return is not as great as other investments. There are three security groups with differing dates to maturity: Treasury Bills or T-bills are a short-term federal debt security from a few days to no more than a year. Most common are three- or six-months maturity dates. The minimum investment is $100 with increments of $100 up to $5 Million. T-bills are bought at discount from there par value. You may buy a six-month T-bill for $975 and face value is $1,000 so your profit is about 2.5% or $25 at maturity. One good thing to keep in mind is Treasury Securities are exempt from State and local taxes. U.S. Treasury notes and bonds are popular because they are safe with competitive interest rates that are subject to federal tax but not state or local. Treasury notes are issued with maturity of 2, 3, 5 and 10 years whereas bonds mature in 30 years. You can check these out at or call 800-722-2678.

U.S. Series EE and I bonds are available at most banks and other financial institutions as well as through payroll deduction in denominations from $50-$5,000 (I bonds) or $10,000 (E bonds). Federal tax can be deferred for up to 30 years or until the owner cashes in the bond. The purchase price of the EE bond is half the face value for example investing $50 the value will be $100 at maturity. Whereas I bonds are sold at face value. Interest on both are paid when the bond is cashed in. Series EE bonds purchased after May 1, 2005 will receive whatever rate was in effect the date of purchase for the life of the bond. These changed to fix rate so any purchased before this date the interest rate is adjusted every six months. Nor does this affect the I bond that are typically adjusted every six months for inflation. Visit See the Internal Revenue Service webpage for any changes to the law at because these may be tax exempt if cashed the same year of qualified education expenses.

Fixed annuities are contracts between an investor and a life insurance company. These can be costly with low returns and also trigger a 10% penalty for early withdrawal before 59 ½ from the IRS. So, these high expense policies include annual contract maintenance fee with a mortality charge of average 1.30% to cover the company’s overhead and death benefits. Fixed rate annuities normally have a declining surrender fee that are gradually reduced over time like 5-10 years. If you purchase an annuity from companies makes sure they are rated A or better keeping in mind AAA is the highest rating. Variable annuities invest in mutual funds are explained later.

After years of underperforming on my portfolio I gradually became more comfortable taking risk thus showing potentially more growth. Buy stepping into a Low to moderate risk and while learning the different investments available helped me take even more risk I was able to get more aggressive over time. The good news is I can now make up 70% of my income at retirement and able to enjoy life. Yes, I retire this year after 38 years with the military. Although my heart is helping my SOldiers, there is a bigger calling through the United States. Hopefully this peaked your interest. Just note that before you start investing, please get out of debt, have a fully funded emergency fund and do your homework.

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