Thrift Savings Plan (TSP) Loan Guide for Federal Employees, Sponsored by Todd Carmack

The Thrift Savings Plan is a significant component of a successful retirement goal for retirees under the Federal Employee’s Retirement System (FERS). It is essential to know how to access your TSP when you retire and claim your funds while still in the workforce.

The TSP loans are a means by which you can claim your TSP funds while employed. Getting a TSP loan is a process of borrowing funds from your retirement account. Before you take the TSP loan, you should consider the effect of withdrawing from your retirement accounts early, although some circumstances can necessitate that you withdraw from your TSP before you retire.

Options for taking a TSP loan

The regulations mentioned here are the general TSP loan rules. The CARES Act has changed how you can access your TSP in 2020.

Types of TSP loans

There are two types of TSP loans: general-purpose and residential loans. As the name suggests, you can obtain the general-purpose loan for any use, and it doesn’t require any documentation. Besides, the general-purpose loan has a repayment duration of one to five years. On the other hand, you can only take the residential loan if you want to construct or purchase a primary residence. You can’t use it to refinance your mortgage or repair your home. The repayment period of a residential loan is one to fifteen years, and it requires documentation.

It is crucial to know that the minimum loan amount you can borrow is $1,000.

Who can apply for a TSP loan?

Suppose you want to borrow from your TSP; here are the stipulations you must meet:

  • You must have a minimum contribution of $1,000 in your TSP account.
  • You must be a current employee of the federal civil service or a uniformed service member.
  • You have not repaid a similar full TSP loan in the past sixty days.
  • You must not have a taxable distribution on loan within the past year, except if the taxable distribution results from your federal service absence.

How to apply for a TSP loan

You can apply for a general-purpose loan online unless your conditions meet one of the following scenarios. Suppose you don’t have an approved Form TSP on file and you want to request money via electronic funds transfer, or you are a uniformed service member or a married FERS employee. In that case, you need to print out the form and submit the loan agreement for processing. Irrespective of how you want to apply for the loan, you must start the process by logging in to your account. If you don’t prefer to submit it through the website, you need to fax or mail it to the TSP office. The steps for processing a residential loan are different because that requires specific documentation.

You should note that the TSP loan doesn’t affect your taxes unless you don’t repay it before you retire. If you don’t pay the loan back before retirement, it may be considered a taxable distribution, affecting your taxes.

If you are a federal employee, you have many available options—your decision to take a TSP loan or not while working will influence your retirement.


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