Accelerate Loan Repayment or Increase Contribution?

**bkjames00** · 10-29-2008, 06:24 PM

So I took out a 15 year loan against my TSP to use as a down payment on my home earlier this year. My question is am I better off accelerating the loan payoff or increasing my TSP contribution?? Or does it matter? Right now my TSP contribution is 5%.

**Birchtree** · 10-29-2008, 07:11 PM

Both offer a deduction but the TSP will probably appreciate faster this time around versus the home. We are at rock bottom golden prices and now is the time to accumulate as many shares as possible for posterity.

**ChemEng** · 10-29-2008, 07:19 PM

Originally Posted by Birchtree

Both offer a deduction

I don't believe that the repayment of TSP loans is deductible. The big part of this decision is whether or not you believe that you will still be employed by our good Uncle in the next 15 years. If so, then I would increase the contribution amount. If not, then I would pay off the loan sooner.

**KAPLOWD** · 10-29-2008, 07:23 PM

Regardless of whether you have a loan or not, you should certainly increase your allotment; otherwise your aren't maximizing your tax deferment.

**Silverbird** · 10-29-2008, 08:18 PM

ChemEng is correct, it is not deductable. I think you pay a little less interest, but there aren't very many other places you can borrow at the G rate. So there are balances here to consider. By the way, if your situation changes you can re-amortize your loan again.

**ATCJeff** · 10-29-2008, 08:25 PM

Originally Posted by bkjames00

So I took out a 15 year loan against my TSP to use as a down payment on my home earlier this year. My question is am I better off accelerating the loan payoff or increasing my TSP contribution?? Or does it matter? Right now my TSP contribution is 5%.

Max out your contributions! $16,500 next year

**Birchtree** · 10-29-2008, 08:40 PM

I meant the interest rate on the mortgage is deductable - sorry about the confusion.

**Scout333** · 10-29-2008, 09:46 PM

Re: Information about taking a loan against TSP

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http://www.tsptalk.com/mb/showthread...thrift+home%22
BK , This thread may help. Interesting discussion re pros and cons.

**Scout333** · 10-29-2008, 10:27 PM

borrowing thrift for a home.

Sorry guys, seems the link wasn't working. Try this one instead.

Just in case the thread name was - Borrowing thrift for a home

**Show-me** · 10-30-2008, 02:16 AM

My two cents, get out from under the loan quick. You are buying shares cheap right now. Then after the loan is paid off crank up the contributions. Right now taxes are cheap, pay the taxes now. The way the Fed, Treasury, and Bush are throwing out money who ever is the next Prez will have to raise taxes on all wage earners to pay down the debt.

**bkjames00** · 10-30-2008, 12:02 PM

Thank you all for your suggestions. The bottom line is that I can only afford to put an additional $100/month (after tax) or about $133 (pre-tax??) into TSP.

So the question is, "Should it go towards paying the loan or increasing my contribution?" By paying the loan I can cut the repayment period in about half -- 15 years to about 7 years.