Should i borrow against my tsp

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The information on this site does not modify any insurance policy terms in any way. A Thrift Savings Plan TSP is a retirement plan offered to uniformed service members or employees of the federal government. A TSP loan allows members of a TSP retirement plan to borrow against their own retirement savings and is similar to a k loan.

For eligible borrowers who need extra cash to finance a large or unexpected expense, a TSP loan can be a logical solution. You can take the loan and invest in gold, lottery tickets, tulips , or whatever you want.

On the face of it, this seems like a pretty good idea. Here are a couple of considerations:. Due to some unanticipated expenses it is doubtful that my wife and I will be able to max out both our traditional ks and Roth IRAs. I place a higher value on fully funding the Roth since we plan to retire by the age of 50 and know that we can withdrawal our contributions without penalty until we hit With that said, I want to continue to max out our ks because tax advantaged space should not be left on the table.

Please explain how either of those options is preferable to my proposal. I want to have my cake and eat it too. Essentially, if you have the cash flow to max out all your contributions, you could take a TSP loan, then repay it back. This is pretty funny, and actually appeared higher on Google rankings than the previous two. I kept it for last simply for the humor value. While I might not agree with the fundamentals in this article, this person seems to have enough money set aside to afford repaying the loan.

It appears that TSP loans do have a place. However, the dangers of borrowing money to earn a better investment still exist.

First, you run the risk of losing money on your investment. Second, you run the risk of underperforming what you would have earned had you left the money alone. A taxable distribution is subject to full taxation and any early withdrawal penalties that may apply. Ironic, huh? Posted In: Thrift Savings Plan. As a retired naval officer, Forrest helps veterans, transitioning servicemembers and their families address the financial challenges of post-military life so they can achieve financial independence and spend more time doing the things they love.

These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. There is generally little downside to paying off your debt and a lot of positives, such as increased monthly cash flow and not having to worry about what happens if you are unable to repay the loan this article covers the downsides more thoroughly.

Yes and no. The principal portion of your loan is your pre-tax money. Only the interest is double taxed. Interestingly enough, someone who took a loan out at the beginning of this year would be sitting much better for having done so.

The only variable that I DO think deserves mention above all others is the possibility of losing your job during repayment and having to pay a penalty for the distribution. That is a huge concern, and honestly my biggest issue with these loans. I think that the option should exist to continue making payments on your own in that case.

It would be a travesty to be unable to leave your job for a very good reason but be stuck for a loan. Load More Comments. Departments of Defense or Veterans Affairs.