Not affiliated with The United States Office of Personnel Management or any government agency

March 28, 2024

Federal Employee Retirement and Benefits News

Tag: tsp loans

tsp loans

Are TSP loans a viable choice?

Are TSP loans a viable choice?

“No loans, no troubles” is the policy employed by many successful businessmen and empire builders but for people with low paying employments, this policy is often not applicable due to financial insufficiency. If you don’t borrow till you retire, you will lead an excellent post-retirement life but if you have to, where should you, as a federal employee be headed?

Without loans, your cash flows will always look beautiful and you will only see improvements. Another reason to avoid loans is that you won’t have to deal with any stress. But let’s assume that you absolutely have to. Should you borrow from your retirement account? Are TSP loans the way to go?

Taking TSP loans:

Taking loans from your retirement accounts is different from the traditional loan methodology. Let’s take an example to consider this: Say you having a 100 thousand dollar debt on your credit card and it has an interest rate of 10 percent. This entails that you will pay a handsome 10 thousand dollars every year or 830 dollars per month and this would be exclusive of the principal. If you pay this over a 5 year period, your monthly interest plus principal will amount to 2120 dollars roughly or over 1200 thousand dollars in total for a 100 thousand debt.

Another option would be to borrow the 100 grand from your TSP account. To counter this, you will have to pay the requirement amount through your pay checks. If you plan to take TSP loans, make sure that you consult the required people before doing so. The best part though is that the interest rates are considerably low. The maximum they get is a meagre 2.125 percent which is nothing compared to what the credit cards charge.

Yes, there are other complexities involved in this regard, but this is one option that you should have in your mind. Note that before you go ahead and take the loan, make sure that you have gone through the guidelines and know all the rules.

More TSP Tips

Additional TSP tips

TSPEach year the Internal Revenue Service (IRS) announces changes that might impact pension plans and other retirement accounts based on the change in the Consumer Price Index (CPI).  Because the CPI did not warrant or meet the statutory criteria for the adjustment, the Thrift Savings Plan (TSP) limitation remains at $17,500 for 2014.   For individuals over age 50, the catch-up contribution remains at $5,500.

PREPAYMENT OF A Thrift Savings Plan Loan

You can prepay your TSP loan without incurring a prepayment penalty.  You can find out about the amount of your loan (principal and Interest) by going on to the Thrift Savings Plan website or by calling the ThriftLine.
Once your loan has been paid in full, the TSP will notify you and your payroll office.  If payments continue to be deducted from your paycheck after you have been notified that the loan has been paid off, contact your payroll office immediately.

THRIFT SAVINGS PLAN LOANS AND WHEN PAYMENTS START

When you take out a Thrift Savings Plan loan, deductions for the monthly loan amount must start within 60 days of the funds being disbursed.  Once the funds have been disbursed the Thrift Savings Plan will notify your payroll office to begin deducting the loan amount immediately.

POSTAL EMPLOYEES AND THE THRIFT SAVINGS PLAN

Postal employees can access their Thrift Savings Plan through LiteBlue.usps.gov (liteblue).  Through LiteBlue postal employees can change, enroll or cancel their Thrift Savings Plan contributiosn.  However, if a postal employee would like to make a Thrift Savings Plan fund transfer they will need to access their Thrift Savings Plan directly through TSP.gov or by phone.

P. S. Always Remember to Share What You Know.

 

 

Not affiliated with The United States Office of Personnel Management or any government agency

©2021 Public Sector Retirement News. All rights reserved. Terms of Use | Privacy Policy
Powered By :  FMM Financial Media & Marketing, LLC, The Best Financial Advisor Websites