The Thrift Savings Plan (TSP) only accepts contributions from government paychecks. Retirement pay does not qualify for TSP contributions. But this doesn’t mean after you leave the military your TSP has to collect cobwebs because of non-use. You can transfer existing retirement assets outside the TSP back into it after you leave military service. Transfers are not the same as contributions.

Why should you consider this option?

The TSP is the least expensive investment account you will ever own. The average cost of the TSP is 38 cents per $1,000 invested. It’s practically free. An inexpensive investment account outside the TSP would compare at $1.90 to $7.50 per $1,000 invested. Typical rates in the financial industry can run from $10.30 to $25 per $1,000. If you invest through an insurance product (variable annuity or variable universal life, for example), you could be paying $30 dollars or more per $1,000.

Here’s a look at the cost as money in your pocket:

• $10,000 in the TSP upon separation earning an average annual return of 7 percent over 30 years would grow to $70,000.
• The same $10,000 with a standard advisor fee of 1 percent of assets under management at 7 percent for 30 years is $56,500. Keep in mind, if you are paying 1 percent of assets under management, you probably are paying annual fees internal to your mutual funds, exchange-traded funds, insurance products, etcetera, in addition to your 1-percent fee.
• $10,000 with a 1.5-percent fee at 7 percent for 30 years is $48,700. This is an average managed-mutual-fund fee.
• Finally, $10,000 with a 3-percent annual fee (e.g., insurance product) at 7 percent for 30 years is $31,300.

Cost matters but so does simplicity. After the military, you might change jobs several times. In each job, you will contribute to a 401(k). Over time, you can collect 401(k)s if you don’t have a plan to consolidate your retirement assets. This is where your TSP can help; you can use it as your “base camp.”

The traditional TSP will accept transferred retirement assets from traditional IRAs and traditional employer retirement plans.

The Roth TSP will accept transfers from Roth employer retirement accounts but will not accept Roth IRA transfers (yet).

You must have an existing traditional TSP to transfer money into the account. Roth transfers, on the other hand, do not require an existing Roth TSP because the transfer will open a Roth TSP as part of your existing traditional TSP.

If you choose to do this, make sure to read more about using your portfolio allocation to properly manage your assetsto achieve a growing or stable account value. Also review TSP.gov for transfer details.