Thread: TSP Loan to Roth IRA?

First let me state I am uneducated "money" person. I do rely on others with some cross checking to manage my money (TSP).

I take out a $4000 dollar loan from my TSP account and put it in the bank. The loan is not taxed to my understanding. I have not paid taxes on it during my contributions either. So this loan is tax free for the moment.

Now I use that money to max out my Roth IRA for the year. I pay off the loan inside of 9 months. No penalty for early payoff. I have to wait 60 days to apply for the same type of loan from TSP. I get the same loan next year and so on and so on...

When I retire and cash in the Roth IRA's I will not have paid a single dime to Uncle. The only money "lost" would be the gains in interest for not having that money in my TSP account. It would be offset by the "gains" from the Roth IRA.

The following years I am borrowing the same $4000 dollars I had just repaid so it’s not like I am continuously draining my account of $4000 each year. I am just "reborrowing" my own money.

I have a simple mind and this seems like a simple idea. Is it even legal? If I put the loan in the bank along with my regular paychecks who is to say what dollar went where. Its one pot of money.

Good? bad? Doable?