TSP Loan – A Good Idea?

tsp loanThrift Savings Plan Loans – If you are thinking about taking out a loan here are some items to consider about possible a TSP Loan.  TSP loan interest rates, for new loans, can be as low as 2.375%.  I don’t think the rates can get much better.  However, if you are thinking about taking out a TSP loan, you need to make sure you are exercising and implementing what you have learned about financial literacy.

There are a number of questions you need to ask yourself before you take out a TSP loan even if the rates are as good as they are.  Interest rates are down and if you are thinking about getting a loan, making a house purchase or any other major purchase, the low interest rates we are currently enjoying is certainly a huge draw.

However, what if you are thinking about retiring soon, is it wise to take out a TSP loan from your TSP account?  Consider this.  Your TSP is a way to help you save for retirement while realizing matching funds from your agency if you are under the Federal Employees Retirement System (FERS).  The TSP acts as a tax deferment for those employees under the Civil Service Retirement System (CSRS), because there are no matching funds from the agency.

If you take money from your TSP even via a TSP loan, you are impacting the value of your TSP account designed to enhance your finances in retirement.  Also remember that a TSP loan is a loan and loans must be paid back.  Even when opportunities sound good, be sure to evaluate your own individual situation and circumstances to determine what is the best fit for your retirement future.

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

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