Question: Is It Bad To Take Out A TSP Loan?

Can I take money out of my TSP to buy a house?

TSP loans used as home loans can be used to buy or build a primary residence.

And that can include a house, condo, mobile home, RV or boat, as long you’re going to live in it most of the time.

TSP home loans must be repaid within one to 15 years, depending on the terms of the loan..

Can I take out my TSP money?

If you are 591/2 or older, you can make withdrawals from your TSP account while you are still employed. This is called an “age-based withdrawal” or “591/2 withdrawal.” You must pay income tax on the taxable portion of your withdrawal unless you transfer or roll it over to an IRA or other eligible employer plan.

Can I still contribute to my TSP if I have a loan?

When you take a loan, you borrow from your contributions to your TSP account. Your loan amount can’t exceed the amount of your own contributions and earnings from those contributions. Also, you cannot borrow from contributions or earnings you get from your agency or service.

Does a TSP loan count as income?

Here’s what that means for you: ○ Your loan amount, including any accrued interest will become taxable income. That means you’ll have to pay income tax depending on which bracket you are currently in. ○ If you are under age 59 ½, you may have to pay an additional 10% tax penalty for early withdrawal.

Is it smart to take out a TSP loan?

While the ease and low cost of borrowing from a thrift savings plan can make it an attractive option, there are some downsides to consider. You won’t earn any interest on the outstanding loan amount, which will affect your long-term retirement savings.

Is it a good idea to take out a TSP loan?

If you need a loan, but don’t have any options, then a TSP loan makes sense. However, the dangers of borrowing money to earn a better investment still exist. They’re actually even more substantial than if you used a more traditional means, such as a HELOC. First, you run the risk of losing money on your investment.

How much TSP loan can I take out?

To borrow from your TSP account, you must be a Federal employee in pay status. If you qualify for a TSP loan, the maximum amount you may be eligible to borrow is $50,000; the minimum amount is $1,000. To find out the amount you have available to borrow, visit TSP Loans in the My Account section.

Should I use my TSP to buy a house?

Using Your Funds to Buy a House Borrowing against your TSP contributions can be an easy way to come up with a down payment and closing costs for your first home. … The loan amount must be between $1,000 and $50,000 and gets repaid at the interest rate for the G Fund at the time of processing.

What happens if I don’t pay back my TSP loan?

Leaving federal service If you do not repay your loan in full, a taxable distribution of the outstanding balance of your loan will be declared. If that happens, you may be able to roll the amount of the distribution into an IRA or eligible employer plan within 60 days to avoid taxes and penalties.

Does TSP loan affect credit score?

When borrowing from the TSP, you are borrowing your own money, there is only a $50 fee, it doesn’t impact your credit score, and you only pay interest equivalent to the G Fund’s returns (and you are repaying that interest to yourself).

Can you pay back a TSP loan early?

You can make extra loan payments (in addition to your payroll deduction) at any time using a personal check, cashier’s check, or money order. You must send Form TSP-26, Loan Payment Coupon along with your extra payments.

What happens to my TSP if I die?

A beneficiary who is not a surviving spouse cannot retain a TSP account. The death benefit payment will be made directly to the beneficiary or to an “inherited” IRA. … If a beneficiary participant dies, the new beneficiary(ies) cannot continue to maintain the account in the TSP.

Can I use TSP loan for closing costs?

There are 2 types of loans available through the TSP; the residential and the general-purpose loan. The residential loan is available to assist in putting together the required funds for a down payment or to help pay for closing costs on a home purchase. … Now, let’s look at why it’s not a good idea to take a TSP loan.

When can I take money out of my TSP without penalty?

With the TSP, you are exempt from the early withdrawal penalty if you separate from federal service in the year in which you reach age 55 or later. For IRAs, the early withdrawal penalty will apply on anything you take out up until you reach the age of 59 ½.

What is the interest rate on a TSP loan?

3.125%Current loan interest rate — The interest rate on your TSP loan is the G Fund rate at the time your loan application is processed. The current rate is 3.125%.