How to borrow from a thrift savings plan?

by | Mar 14, 2023 | Thrift Savings Plan | 1 comment

How to borrow from a thrift savings plan?




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A thrift savings plan, also known as a TSP, is a retirement savings plan offered to federal employees and members of the uniformed services of the United States. The plan offers various investment options and tax benefits, making it an attractive option for those looking to save for retirement.

But what if you need to borrow from your TSP account before retirement? Here are the steps on how to do so:

1. Check if you are eligible to take out a loan. According to the TSP website, you can take out a loan if you are a current federal employee or member of the uniformed services with an active TSP account. Additionally, you must have at least $1,000 in your account and have not taken out a loan in the past 12 months.

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2. Determine how much you need to borrow. You can borrow up to 50% of your vested account balance, with a maximum loan amount of $50,000.

3. Decide on the repayment term. You can choose a repayment term of one to five years, depending on the amount borrowed. Keep in mind that if you leave federal service before repaying the loan, the outstanding balance will be considered a distribution and will be subject to taxes and penalties.

4. Log in to your TSP account and apply for the loan. You can do this through the TSP website or by submitting a TSP Loan Request form. Be sure to provide accurate information, including the amount borrowed, repayment term, and any other requested details.

5. Wait for approval and receive the funds. Once your loan application is approved, the funds will be transferred to your specified account within 5-7 business days.

6. Make timely payments. Your loan payments will be deducted from your paycheck on a pre-tax basis. If you miss a payment, you will be considered in default and will have to pay taxes and penalties.

Borrowing from your TSP account should be a last resort, as it can potentially impact your retirement savings. However, if you need to borrow money for an emergency or unforeseen circumstance, a TSP loan can be a viable option. Just make sure to carefully consider the terms and implications before making a decision.

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1 Comment

  1. Claes Lind

    Is that woman an A.I?

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