Should I Use A Financial Advisor Or The Thrift Savings Plan?

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I spend a lot of time answering reader questions. Some of them are unique personal decisions, but most of them are about very common situations. I also get personal-finance feedback that just has to be shared with everyone.

For example, fewer than half of today’s military servicemembers even have a Thrift Savings Plan account, let alone make contributions to it. One of the reasons is a lack of knowledge (nobody ever really showed them how to sign up), and another reason is just not appreciating how the contributions can compound over time. A third reason is that people are too busy with their careers, their qualifications, their families, and their lives– there’s no time to worry about investing for a financial independence that might be decades away!

But you don’t have to hear it from me when you can read the wisdom of someone who’s been there:

So, I logged into my TSP account. I must say that I’m very disappointed in myself for not putting more money into the TSP. I’m approaching 14 years of service and I have at least six more years of active duty. If I put at least $200 a month towards TSP for those remaining six years, it will amount to an additional $14,400 towards my retirement.

I’m mentioning TSP because I don’t want you junior folks to look at your TSP account and be as disappointed in yourself as I am. Invest in your future!

Image of the Thrift Savings Plan logo |

The best place to invest.

Then there are the questions about financial advisors. You see the advertising every day (including on this website) and you may even see it at your command’s financial training. It’s very tempting to just invest with someone who knows what they’re doing and will grow your money faster than the market!

But again, I’m not going to glaze your eyeballs with statistics about how the vast majority of financial advisors consistently underperform the market. Here’s more feedback from one of way too many readers who found out for themselves:

I’ve been in the military for 10 years now. I’m getting out in a little under a year. When I first started, I opted to get a financial advisor from one of the many “how to budget your money” training sessions they put us through. Seemed to make sense at the time. Take my money, manage it, take a little out for doing a job well done. But the more I dig into this site the more I wonder if it’s really worth it. I’ve never used the TSP. It always felt too limited to me. But considering my advisor hasn’t done as well in the performance area, part of me is seriously thinking about it. Is it worth it / can I somehow take my lump sum Roth from where it is now, and transfer it to the TSP? Or what would you recommend? The non IRA portion I’m debating about moving too to some Vanguard fund.

Before this reader starts moving money around, they need a transition fund to pay the bare-bones living expenses for at least a few months after active duty. That cash will cover the delays (and other surprises) while they affiliate with a Reserve/National Guard unit, or get paid by the GI Bill for college/certifications, or start their own business, or network to a corporate career.

Financial advisors charge fees for their services, and the only question is who’s paying them. Sadly, too many advisors are financially motivated to keep the clients blissfully ignorant while selling products with high commissions. Admittedly some clients are “too busy” (or too apathetic) to do their own investing. Other clients want an advisor to “hold their hand” and help them stick to the plan during recessions and bear markets. A few clients earn so much that they’ve outsourced the financial management. (They’re willing to pay for the outsourcing because they can earn more income at their career.) Even those clients pay more for the “help” than if they’d invested in passive index funds through automatic deductions.


A better way to use a financial advisor

There’s a better way to get financial advice: You can learn how to set up your own investments and automate them. You can consult fee-only financial planners to make sure you’ve covered all the details. They only get paid by the hour for their labor and experience. They don’t earn commissions from selling products, so they have no reason to upsell you. Meanwhile when you learn the basics and make a plan (with or without the help of a fee-only CFP) then you’re much more likely to stick to the plan and reach your goals.

No advisor has consistently outperformed the market indexes any better than random chance, and (even worse) it takes too many years to figure out whether you’ve chosen the “winning” advisor. If you do find the Warren Buffett of the Millennial generation, so will everyone else– and the next Buffetts will end up with so much money thrown at them that they won’t be able to invest it quickly enough to continue beating the market. In the meantime, you could put your savings into passive index funds and simply focus your effort on achieving a high savings rate. You don’t need to beat the market– you only need to beat inflation. When your diversified investments have low expense ratios then you’ll earn over 99.9% of the index return with about 5% of the effort.

The TSP is plenty diversified, and it includes all of Vanguard’s “three-fund portfolio” assets.* It also includes the L funds to automatically rebalance your asset allocation as you approach retirement. If you feel the need to push your limits (Real estate? Commodities? Precious metals?) then do that with your Roth IRA and taxable accounts through Vanguard or another large financial institution with low expense ratios. However, those niche assets will probably only make up 10%-25% of your portfolio’s overall asset allocation.

This investor can (and should) transfer their traditional IRA into the TSP. (Here’s the traditional-IRA-to-TSP transfer form.) They’ll pay the world’s lowest expense ratios while sorting out the rest of their investment portfolio.

The TSP doesn’t have the procedures or systems to transfer a Roth IRA into the TSP, but TSP account holders can also transfer a civilian employer’s Roth 401(k) (or a 403(b), or 457(b)) to a Roth TSP account.

A Roth IRA can easily be transferred to a Vanguard account (or any other large financial institution like USAA, Fidelity, or Schwab) and once it’s there then you can sell the shares of your old funds and buy index funds with low expense ratios. Since that’s all done inside a Roth IRA, it’s not taxable.


The best way to leave a financial advisor

The best way to tactfully leave a financial advisor is to contact the new fund company, set up a Roth IRA account number with them, and then have them handle the paperwork of the transfer. You won’t have to talk to your advisor.

Other (taxable) investment accounts can be transferred, but there are probably capital gains when a taxable account sells actively-managed funds (or individual stocks) to buy index funds. The new company can help execute an “in kind” transfer of all your taxable account shares to your new account, where you can gradually sell the old shares (in a tax-efficient sequence/timing) and buy shares of passively-managed index funds.

I’m not a certified financial planner, but I’m free. (I’m financially independent. I’m not going to charge for free advice.) Contact me or e-mail me (NordsNords, Gmail) if you want to dig into the details with your accounts, or consult with a fee-only CFP.

The two military veteran CFPs I know best are:

  • Rob Aeschbach at and
  • Forrest Baumhover at

Their first hour is free, and then you pay an hourly rate for their time & experience– no upsells or commissions.


Call to action:

  • Are you signed up for the Roth TSP?
  • Are you on track to maximize your contributions for 2016?


* (Note: here’s more info about the details of a Bogleheads three-fund portfolio.)




The Military Guide to Financial Independence and Retirement Price: By Doug Nordman: This book provides servicemembers, veterans, and their families with a critical roadmap for becoming financially independent. The Military Guide to Financial Independence and Retirement All Author royalties donated to military charities. Last Updated: 10/10/2018


Related articles:
Financial Advice To Start Your Military Career
“Can I Transfer My Roth IRA To My Roth TSP?”
Ask your Dad if you should contribute to the Roth TSP
Early Withdrawals From Your TSP and IRA After The Military
Funding The Gap: “I Need Money From My TSP!”
“Should I Invest In The Thrift Savings Plan Or In Taxable Accounts?”
How (And Why) To Transfer Your TSP To An IRA (after you’re financially independent!)

WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. I’m going to pile on about TSP, time and constraints. I had been Active and Reserve for 15 years before the military was given the use of TSP. At that time as a Reservist, I could only invest up to $5K per year, which was only one-third of what was allowed for active duty and government civilians. That amount was gradually increased over the next 3-5 years (don’t remember now) to the full amount allowable by law that an employee could place into a tax deferred pension plan such as a 401K/403b—-fast forward 15 years later as I retired with 30 years and am now awaiting my pension (8 years more). The amount in my TSP account rivals that which I had in my civilian 403b account which had matching! My goal each year was to max out the amount that I could invest to the legal limit, assuming I drilled enough that year to get that. Essentially most of my Reserve pay went into the TSP. I had not been paying too much attention to it but was shocked at how much I had saved over that amount of time and in fairly small chunks.

    Time and discipline are your friends….I don’t have to work now and won’t if I don’t want to. I have several streams of income that will pay me over graduated time from after-tax, pension and tax-deferred sources…..and to be honest I only started this journey about 24 years ago with a goal to retire early.

    One other thing – index investing can be your friend, too. The comments regarding losing any gain by having management fees eat up your gain are spot on. One way to avoid that is using index investing. However, interestingly, just having the self-discipline to save is probably the most important skill.

    So for all of you out there who are wondering if it works….it does. Live below your means, invest the rest, be consistent about that and give it a bit of time. If you are in a real hurry to retire early, I suggest you mosey on over the the Extreme Retirement Blog…if you have a little more time keep reading here, get Doug’s book, plus a few other, read Money Mustache plus a few other blogs and follow what they say.

  2. The military has made significant progress in educating service members in personal finance, although there is a need for further improvement (although how much hand holding should be done?). I know that both the Navy and the Army meet the DOD policy of providing training on some specific personal finance topics, including TSP and investing, by the time they are at the first permanent duty station for three months. Apparently the Navy does it in boot camp for the enlisted members and the anecdotal evidence I have from speaking to young service members is that some sign up at the training but only a fraction of those know how their money is invested (meaning they still have it in the G fund), the Army completes their training during their MOS schools (I don’t recall the official term), but on Saturdays with an all day session. Neither approach is the best time I think.

    • Thanks, Gerald, I agree on the timing!

      I hope the new blended retirement system follows through on its promise of mandatory TSP enrollment (like the federal civil service system) and then also makes the default contributions go to the L2050 fund instead of the G fund.

  3. Have been investing with Vanguard for well over 35 years now . If my career arc included the military era of TSP, 2005 on, would have done that. Though in its Admiral shares fee structure I am paying anywhere from 3 to 15 basis points, compared to well over 70 to 150 in similar asset mix funds offered by Fidelity. Factor those numbers over 30-35 of compounding, one sees how “managed” or active fund houses are going the way of the dinosaur as well as traditional client advisory. Its Voyager and Flagship levels of services does inbed a certain level of advisor ship and client access to professional management at little or nominal fees. But the assumption is the investor know pretty much what he or she is doing and does not need much hand holding. A conclusion that I do not think can be applied to the younger service member now being marketed by the DOD to take the new blended, hybrid retirement plan, with the lump-sum option, a win, win for the DOD.

    The old Vanguard vs. TSP vs. anything else debate is as old as time. No matter what or whom one invests with fees do matter, especially in a single digit. negative interest rate world we will be living in for the next 5-10 years at least. Time is your friend, the sooner one gets on the ball the better.

    Comment? Question? What's on your mind?