#rbi #fersretirement #tsploans TSP is a retirement savings plan that allows you to invest a portion of your paycheck, typically but not always, before taxes are withheld. But what happens if you need to access the money prior to retirement? TSP savings have been used to make home repairs, purchase a more reliable means of transportation, or pay off student loan debt. No matter the reason, your TSP is there if you need it, however you must follow TSP’s rules.

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The information contained in this video should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters. RBI is not a broker-dealer, investment advisory firm, insurance company, or agency and does not provide investment or insurance-related advice or recommendations. Brandon Christy, President of RBI, is also president of Christy Capital Management, Inc. (CCM), a registered investment advisor….(read more)

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The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services. One of the features of the TSP is that it allows participants to take out loans against their account balances. While this can be a convenient option for those in need of quick cash, it’s important to know the ins and outs of TSP loans before taking one out.

Here’s what you need to know about TSP loans:

1. The basics of borrowing: Participants in the TSP can take out loans from their account balances for any reason, as long as they have money available in their account to borrow. The minimum loan amount is $1,000, while the maximum is the lesser of 50% of your vested account balance or $50,000 (whichever is less). Loans must be repaid with interest over a period of one to five years, with a maximum term of 15 years for loans used to purchase a primary residence.

2. Interest rates: The interest rate on a TSP loan is set by the TSP Board on a quarterly basis, and is based on the average yield of all TSP investments. As of October 2021, the interest rate for new TSP loans is 1.125%, which is very competitive compared to other types of loans.

3. Repayment terms: TSP loan payments are made through payroll deductions from your federal salary or military pay. If you separate from federal service before your loan is repaid in full, you must still repay the remaining balance within 90 days, or the remaining balance will be treated as a taxable distribution.

4. Impact on savings: Taking out a TSP loan can have a negative impact on your long-term retirement savings. When you take out a loan, the money you borrow is no longer invested in the TSP, which means it is not earning any investment returns. Additionally, your loan payments are made with after-tax dollars, which means that you’re not able to take advantage of the tax-deferred growth that you would otherwise receive.

5. Consequences for default: If you are unable to make your loan payments, the TSP will consider your loan to be in default. At that point, the outstanding balance of the loan will be reported as a taxable distribution to the IRS, and may also be subject to penalties. In addition, if you default on a TSP loan, you may not be able to take out another loan until the default is resolved.

In summary, TSP loans can be a convenient way for federal employees and members of the uniformed services to access quick cash in times of need. However, it’s important to remember that taking out a loan can have long-term consequences for your retirement savings. Before taking out a TSP loan, make sure that you have a clear plan for how you’ll repay the loan, and consider whether there are alternative sources of funding available.