TSP Loan Rate

[Frixxxx]

Looks like we are up to 3.0%.

Don't know when they raised it.

Just thought the G Funders would like to know!:cool:

[Davehop21]

I believe it was 3.25 until recently like 3 weeks ago it dropped to 3.

Dave at VA

[Frixxxx]

Last time I looked it was 2.75...so wow....from there to 3.5 back to 3.0

Good reason not to be sitting in "G".:cool:

[Frixxxx]

Loan interest rate for new loans is 3.125%. as of Nov 2nd

[Frixxxx]

TSP Loan Interest Rate is currently: 2.875%.

For those who desperately need the money.

G Funders are not happy!

[Frixxxx]

TSP Loan Interest Rate is currently: 3.500%. :blink:

For those who desperately need the money.

What a Jump!

G Funders are kinda happy!:suspicious:

[JTH]

TSP Loan Interest Rate is currently: 3.500%. :blink:

For those who desperately need the money.

What a Jump!

G Funders are kinda happy!:suspicious:

Thanks for the heads up, that's a substancial increase.

[Frixxxx]

Whatever they charge is the current return on the G Fund.

I like to let the people know!:cool:

[Frixxxx]

The current interest rate is 3.125%.

Not too bad of a decline this month...:suspicious:

For those who desperately need the money.

G Funders are not happy!

[Scrappy]

The current interest rate is 3.125%.

Not too bad of a decline this month...:suspicious:

For those who desperately need the money.

G Funders are not happy!

Frixxxx,

when a persons payment is made to their TSP account for a loan, doesn't the interest go back into the account as well?

If so:

I can understand someone wanting the rate to be lower to make the payment lower but on the other hand, why wouldn't a person want more $/shares going into the account?

[Boghie]

Frixxxx,

when a persons payment is made to their TSP account for a loan, doesn't the interest go back into the account as well?

If so:

I can understand someone wanting the rate to be lower to make the payment lower but on the other hand, why wouldn't a person want more $/shares going into the account?

For those 'invested' in the 'G Fund' an annual rate of return of 3.125% doesn't put food on the table - now or in the future...

That is why such a low rate is not good.

For those that borrowed from their TSP account the most negative factor is not the interest payment (at least not right now) but the fact that they have to 'invest' in the 'G Fund'. Additionally, they do NOT gain the interest from the 'G Fund' they pay the interest (to themselves). So, they gain nothing.

[Scrappy]

For those that borrowed from their TSP account the most negative factor is not the interest payment (at least not right now) but the fact that they have to 'invest' in the 'G Fund'. Additionally, they do NOT gain the interest from the 'G Fund' they pay the interest (to themselves). So, they gain nothing.

PLEASE clarify:

What do you mean by "have to" invest in the G fund?
And what do you mean "they do NOT gain the interest from the 'G Fund'"
When you say they gain nothing does that mean the payment amount and shares purchased when a payment is made is the same no matter what the TSP loan rate is? :confused:

[Frixxxx]

PLEASE clarify:

What do you mean by "have to" invest in the G fund?
And what do you mean "they do NOT gain the interest from the 'G Fund'"
When you say they gain nothing does that mean the payment amount and shares purchased when a payment is made is the same no matter what the TSP loan rate is? :confused:

I know not of what Boghie speaks of, according to the booklet, if you take a loan from TSP:
When you borrow from your TSP account, your account balance is decreased by the amount of your loan. If your loan account is invested in more than one fund, your loan is deducted on a proportional basis from the employee contributions (and earnings on those contributions) that you have in each fund.
When you pay back your loan:
When you repay your loan, your payments are invested in your TSP account according to your most recent contribution allocation.

Page 6 of the booklet.

The reason I post the interest rate is to show people thinking about a loan what the interest rate will be if they locked in at that time.

Hopefully this helps!:cool:

[Scrappy]

I know not of what Boghie speaks of, according to the booklet, if you take a loan from TSP:
When you borrow from your TSP account, your account balance is decreased by the amount of your loan. If your loan account is invested in more than one fund, your loan is deducted on a proportional basis from the employee contributions (and earnings on those contributions) that you have in each fund.
When you pay back your loan:
When you repay your loan, your payments are invested in your TSP account according to your most recent contribution allocation.

Page 6 of the booklet.

The reason I post the interest rate is to show people thinking about a loan what the interest rate will be if they locked in at that time.

Hopefully this helps!:cool:


Thank you sir! that helps a lot. :)

My main question remains though. Why would a person want the rate to be low?

Wouldn't a higher rate equate to a greater return to the account?

I would think for some people, the higher the TSP loan rate the better?

[Frixxxx]

Thank you sir! that helps a lot. :)

My main question remains though. Why would a person want the rate to be low?

Wouldn't a higher rate equate to a greater return to the account?

I would think for some people, the higher the TSP loan rate the better?
Good Question-

Remember a loan is paid back with AFTER tax dollars. So your interest rate is also AFTER tax dollars. The higher the rate, the more YOU have to pay back!

Anyone else see it different?

[WorkFE]

The bigger issue IMO is the difference between what you can loan money to yourself for and what the bank will loan it to you for.
If the TSP interest rate is 3.2 and the bank is 4.2 is it worth taking ?$ out of the investment stream vs. paying the bank the money. When bank interest rates are high it is a no brainer. A little more brain work when they are low or you are able to obtain a low rate.

[Frixxxx]

The bigger issue IMO is the difference between what you can loan money to yourself for and what the bank will loan it to you for.
If the TSP interest rate is 3.2 and the bank is 4.2 is it worth taking ?$ out of the investment stream vs. paying the bank the money. When bank interest rates are high it is a no brainer. A little more brain work when they are low or you are able to obtain a low rate.
There is a calcualtor out here that shows how to determine which is more viable.....credit cards vs TSP loan....And I can't find it anywhere.....

Help me Obiwan Kenobe....your my only hope!

[Frixxxx]

There is a calcualtor out here that shows how to determine which is more viable.....credit cards vs TSP loan....And I can't find it anywhere.....

Help me Obiwan Kenobe....your my only hope!
Remembered...Corepuncher's Signature has the spreadsheet!:nuts:
Woohoo post 2222!!!!

[Frixxxx]

Interest Rate: The current interest rate for new loans is 3.375%, which is the current G Fund interest rate.


:nuts:G Funders----REJOICE!!!!!!:nuts:

[SkyPilot]

I took out the max loan for 5 years to pay off my Parent Plus loans for my kids college. While I would have made a 60% + gain if I had left the money in the S fund, I just considered it a portfolio diversifiacation ( aobut 25% in the equivelent to the G fund). I killed the 8.5% loans and am paying my TSP account back as 3.25%, so I figure that I enjoying a spread of about 12%. That's not a bad return anytime.

So, it just depends on what your circumstances are. I would be enjoying even a better situation if the market would just tank and my TSP account could lose 50% again. Then my decision to pull money out to pay loans would seem like sheer genius and I would have shielded that 50k from huge losses! :nuts::nuts::nuts:

[Frixxxx]

I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

He would have paid 600/month for 30 years if he paid the credit cards level.

He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....:cool:

Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....

[Boghie]

A loan rate of 3.375% means a 'G Fund' return of 3.375%.
Whooopeeeeee...

But, that is very bad news for a government that borrowed $1.5 Trillion last year:nuts:

Looks like the Bond Funds are pulling on the leash, eh...

[SkyPilot]

I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

He would have paid 600/month for 30 years if he paid the credit cards level.

He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....:cool:

Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....

Good work! :)

[Show-me]

You Sir, are a good citizen and co-worker!:D


I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

He would have paid 600/month for 30 years if he paid the credit cards level.

He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....:cool:

Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....

[Frixxxx]

Interest Rate: The current interest rate for new loans is 3.250%, which is the current G Fund interest rate.

Don't know when it "officially" changed.....:sick:

I think TSP'ers need to be notified of the change somehow automatically!:cool:

[XL-entLady]

I reviewed a loan from a coworker and he was paying 600 a month to meet his minimum payment on a credit card.

We looked at the new bill and I showed him in 2 years at 6 month he could pay off his bill now.

He would have paid 600/month for 30 years if he paid the credit cards level.

He wins....saved him about 30K and he's debt free if he doesn't use the card for two years.....:cool:

Oh, and I had him up his tax-deferred contribution to the 5% to get the max matching.....he's taking home more this year.....
I always knew you were a sweetie. Good job!

[Frixxxx]

I always knew you were a sweetie. Good job!
Thank you, got to learn them uneducated masses.

BTW, he watches the SS now...Thanks Coolhand!:cool:

[Frixxxx]

Interest Rate: The current interest rate for new loans is 3.250%, which is the current G Fund interest rate.

No change as of 1 Jun!
:D

[Frixxxx]

Interest Rate: The current interest rate for new loans is 2.875%, which is the current G Fund interest rate. :blink:

But Jun 3rd has a change!

[alevin]

Wow Frixxxx, that is quite a drop in rate! People in Europe panicking or something?

[Frixxxx]

Interest Rate: The current interest rate for new loans is 2.625%, which is the current G Fund interest rate. :blink:

Anyone need a loan or re-amortize?

Wow!

[JTH]

Interest Rate: The current interest rate for new loans is 2.625%, which is the current G Fund interest rate. :blink:

Anyone need a loan or re-amortize?

Wow!

Thanks Frixxxx, I do like the updates because I tend to forget to check the website. When I realize the G-Fund rate is so low, I do take that into account when considering my next allocation.

[Frixxxx]

Thanks Frixxxx, I do like the updates because I tend to forget to check the website. When I realize the G-Fund rate is so low, I do take that into account when considering my next allocation.
That's why Tom pays me the BIG BUCKS!!!:laugh:

[fabijo]

I have no idea if anyone will really see this post buried in the G Fund thread, but here goes...

Every once in a while, I check out the TSP Loan rate out of curiosity. I've used it in formulas to compare investments/loans in Excel. But a couple times, I've used the TSP Loan calculator on the TSP site to see how much the biweekly payments are. Every time, the payment they show is different than the payment I calculate in Excel. I can get it dead on when I use Excel to calculate mortgage payments, but it never goes right with the TSP Loan. I've searched and searched and I just can't quite figure out how it works.

Here's an example:

Currently, the TSP calculator (here (https://www.tsp.gov/planningtools/loan/loan.shtml)) says the rate is 2.625%. I plug in $10,000, 5 years payed off biweekly (26 times a year).

It comes up with 130 payments at $83.00 each, with a total in payments equaling $10,790 - an interest payment of $790 by the end.

now in Excel...

I must be doing something wrong in my formulas, but the only way to get the payment and total interest to match is to use a rate of 3.0586%

I use the PMT formula in excel. The syntax of PMT is:

PMT(rate, number of periods, present value, [future value], [type])

future value and type are optional. I usually leave them out, but I've tried using them to no avail.

For rate, I use the quoted rate divided by 26 (.02625/26)

For the number of periods, I use 26 * years. In this case, it's 26 *5 = 130 payments. That matches up with TSP calculator.

Present Value is $10,000 in this case.

If I plug those numbers in, I get 130 payments of $82.12, with a total of payments equaling $10,675.60. That's $114.40 less than what the TSP site calculates. The only way I can make it equal is to plug in a percentage of 3.0586%

I've tried online loan calculators and it is the same thing. I'm guessing the TSP must be doing some strange rate calculations, but I just can't figure it out. Has anyone else noticed this or do you see where I'm going wrong???

[tsptalk]

I have been using this "what's missing" calculator for years (http://www.hughchou.org/calc/missing.cgi) and get what you get.

http://www.tsptalk.com/images/mb/080410a.gif


I have no idea if anyone will really see this post buried in the G Fund thread, but here goes...
By the way, I moved this thread out of the G-fund forum and into a new sub-forum called "TSP Loans" under the TSP News forum.

[fabijo]

Thanks, Tom. I wonder what strange accounting method the TSP is using then. Maybe I'll have to call them to find out what they are doing.

[Viva_La_Migra]

I have no idea if anyone will really see this post buried in the G Fund thread, but here goes...

Every once in a while, I check out the TSP Loan rate out of curiosity. I've used it in formulas to compare investments/loans in Excel. But a couple times, I've used the TSP Loan calculator on the TSP site to see how much the biweekly payments are. Every time, the payment they show is different than the payment I calculate in Excel. I can get it dead on when I use Excel to calculate mortgage payments, but it never goes right with the TSP Loan. I've searched and searched and I just can't quite figure out how it works.

Here's an example:

Currently, the TSP calculator (here (https://www.tsp.gov/planningtools/loan/loan.shtml)) says the rate is 2.625%. I plug in $10,000, 5 years payed off biweekly (26 times a year).

It comes up with 130 payments at $83.00 each, with a total in payments equaling $10,790 - an interest payment of $790 by the end.

now in Excel...

I must be doing something wrong in my formulas, but the only way to get the payment and total interest to match is to use a rate of 3.0586%

I use the PMT formula in excel. The syntax of PMT is:

PMT(rate, number of periods, present value, [future value], [type])

future value and type are optional. I usually leave them out, but I've tried using them to no avail.

For rate, I use the quoted rate divided by 26 (.02625/26)

For the number of periods, I use 26 * years. In this case, it's 26 *5 = 130 payments. That matches up with TSP calculator.

Present Value is $10,000 in this case.

If I plug those numbers in, I get 130 payments of $82.12, with a total of payments equaling $10,675.60. That's $114.40 less than what the TSP site calculates. The only way I can make it equal is to plug in a percentage of 3.0586%

I've tried online loan calculators and it is the same thing. I'm guessing the TSP must be doing some strange rate calculations, but I just can't figure it out. Has anyone else noticed this or do you see where I'm going wrong???
FRTIB skimming off the top maybe?:confused:

[Frixxxx]

Thanks, Tom. I wonder what strange accounting method the TSP is using then. Maybe I'll have to call them to find out what they are doing.
They round the payment amount.

It is an estimator:D Your calculations are correct, but if you change the dollar amount to 9993 - 10123 the payment is $83.00

You can't get an odd number (83.35) on the estimator!:cool:

[Viva_La_Migra]

They round the payment amount.

It is an estimator:D Your calculations are correct, but if you change the dollar amount to 9993 - 10123 the payment is $83.00

You can't get an odd number (83.35) on the estimator!:cool:
I like my explanation better.:cool:

[Frixxxx]

I like my explanation better.:cool:
You'd be sounding like he who will not be named:blink:

[fabijo]

They round the payment amount.

It is an estimator:D Your calculations are correct, but if you change the dollar amount to 9993 - 10123 the payment is $83.00

You can't get an odd number (83.35) on the estimator!:cool:

They do this beyond just in the estimator. I've got a home loan I took out a couple years ago and their math did the same funny magic. I also just went and tried to see what would happen if I logged in and applied for a loan to see if the numbers would be right. They still came out with payments similar to the "estimator."

Maybe they use tables instead of a formula, similar to tax tables. Now that's something I can see happening.

[crws]

You'd be sounding like he who will not be named:blink:

LOL @@@hnold? :D

[James48843]

Fabijo:

When you take out a TSP loan, you are also charged a $50 fee for doing the loan.

Add $50 to the amount you are financing, and see if that covers the difference.
(p.s.- and you aren't going to get exactly 26 pay periods every year. Some years have an extra one. )

[crws]

They do this beyond just in the estimator. I've got a home loan I took out a couple years ago and their math did the same funny magic. I also just went and tried to see what would happen if I logged in and applied for a loan to see if the numbers would be right. They still came out with payments similar to the "estimator."

Maybe they use tables instead of a formula, similar to tax tables. Now that's something I can see happening.

did you take into account that the interest rate has changed?
today it's 2.5%, when we got our loan in 2006 it was 4% I believe.
-actually 3.5% I checked

[fabijo]

Fabijo:

When you take out a TSP loan, you are also charged a $50 fee for doing the loan.

Add $50 to the amount you are financing, and see if that covers the difference.
(p.s.- and you aren't going to get exactly 26 pay periods every year. Some years have an extra one. )

If you take out $10,000 the $50 comes out of that, so the amount financed is still $10,000.

[James48843]

FRTIB skimming off the top maybe?:confused:

Now THERE you go. That must be it.

[fabijo]

did you take into account that the interest rate has changed?
today it's 2.5%, when we got our loan in 2006 it was 4% I believe.
-actually 3.5% I checked

Yes, I saw that. So for $10,000 at 2.5% on TSP site, it says $82.06 for 130 payments with total interest @ $666.67.

Putting those numbers into standard loan payment formulas, you get $81.87 for 130 payments with interest @ $643.10

....

When I got my loan out in 2008, the rate was 3.375% and they also gave me a different number than what is calculated using standard formulas.

I'm really leaning toward them using some form of payment tables.

[Frixxxx]

LOL @@@hnold? :D
Someone from the board who no longer plays here! But nice guess!

[Scout333]

Yes, I saw that. So for $10,000 at 2.5% on TSP site, it says $82.06 for 130 payments with total interest @ $666.67.

Putting those numbers into standard loan payment formulas, you get $81.87 for 130 payments with interest @ $643.10

....

When I got my loan out in 2008, the rate was 3.375% and they also gave me a different number than what is calculated using standard formulas.

I'm really leaning toward them using some form of payment tables.

Possibly could be a few days delay in starting bi-weekly payments. i.e. receive loan proceeds during the pay period but payments won't start until actual pay date 10 days or so after the end of the pay period. I had a similar issue when I paid mine off. Payoff quoted was off over $ 50. Received a check about 10 days after the payoff posted.

[87LiftedHigh]

I have a question about the tsp loans and I'm sorry if it is not suppose to be posted here I could not find the answer anywhere. I am in my tsp loan at a rate of 3.5% and the current rate is 2.5%. Is their a way for me to take advantage of this current rate with my past loan? If I Reamortize my current loan will it change my rate to the current rate?

[burrocrat]

I have a question about the tsp loans and I'm sorry if it is not suppose to be posted here I could not find the answer anywhere. I am in my tsp loan at a rate of 3.5% and the current rate is 2.5%. Is their a way for me to take advantage of this current rate with my past loan? If I Reamortize my current loan will it change my rate to the current rate?

reamortizing will only change your payment amount and duration of the loan, not the interest rate.

is it a general or home loan?

with a general loan you have the option of arranging temporary financing from another source, pay off the loan, then wait 60 days and take out a new general loan at the lower rate. borrowing from peter to pay paul so to speak, about a 90 day juggling act to pull it off by the time it is all settled. if the amount under loan is significant maybe the interest savings would be worth it.

if it is a home loan, i don't think you can take out another without re-purchashing a home, so you would have to retire the home loan, then take out a general loan on the second move, limits your options to tap the general loan feature if needed because you can only have one of each type open at any time.

i have used the general loan as a sort of 'forced' savings plan. take out the loan and deposit the cash, makes my balances bigger in private accounts, emergency money is always there immediately if needed, then pay yourself back every pay period to rebuild retirement savings. makes me feel like i'm making progress toward building sufficient balances and emergency fund without having to save a bit each time and wait for it to accrue.

downside is you miss upside gains because balance is not there in tsp to catch the wave. on the other hand, i've been getting pounded by the waves so a gauranteed 3.5% return on my own repayments might not be a bad thing.

[PessOptimist]

I have been re reading all this and I haven't been to the TSP.gov site to check any of it out but I have some questions and a scenario.

Question: some of you appear to be saying the loan is variable based on the G fund rate? Others allude it is fixed at the time you make the loan. You are always a confusing group.

Scenario: someone who owes 37k on a home scheduled to be paid off in 2.7 years is paying 5.25% interest. Still required to have an escrow account. If that person borrowed 37K from his/her TSP account to pay off said mortgage and paid the TSP loan off in 3 years, what would be the advantage or disadvantage?

There is no longer a tax advantage for mortgage interest.

Can you still contribute the max amount plus over 50 amount in addition to the loan repayment?

Which funds does the loan get taken from?

Does the loan repayment go to the same funds as your allocation?

Does the repayment allocation change as you change your allocation?

For example, if you change your allocation to 100% C and get a loan, does it all come from C? That would be good today as funds in C today are losers.

If you change your allocation to say 100% F, does the repayment all go in to F fund?

What if you do an IFT to 100% C and get the loan? Then do an IFT to wherever. All money is borrowed from C? Where does the payback go?

Random questions.

[burrocrat]

Scenario: someone who owes 37k on a home scheduled to be paid off in 2.7 years is paying 5.25% interest. Still required to have an escrow account. If that person borrowed 37K from his/her TSP account to pay off said mortgage and paid the TSP loan off in 3 years, what would be the advantage or disadvantage?
tsp residential loan at 2.5% is a significant interest savings. bonus is you are paying yourself not the bank.


There is no longer a tax advantage for mortgage interest.
i don't know, maybe the tsp residential loan does allow mortgage interest tax advantage.


Can you still contribute the max amount plus over 50 amount in addition to the loan repayment?
yes. loan repayments are not counted as new contributions, you are replacing prior contributions, they do not affect current year contribution amount.


Which funds does the loan get taken from?
yours.


Does the loan repayment go to the same funds as your allocation?
yes, same as your contribution allocation.


Does the repayment allocation change as you change your allocation?
yes, same as your contribution allocation


For example, if you change your allocation to 100% C and get a loan, does it all come from C? That would be good today as funds in C today are losers.

If you change your allocation to say 100% F, does the repayment all go in to F fund?

What if you do an IFT to 100% C and get the loan? Then do an IFT to wherever. All money is borrowed from C? Where does the payback go?
yes, same as your contribution allocation


by taking a tsp loan at 2.5% now you are locking in that rate of return on that money for the term of the loan. depending on your investment style, you may have intended to keep that amount in a vehicle that returns a similar safe amount anyway, like the 'G' fund.

if you are the type that likes to push all your tsp funds in the 'S' or 'I' when you devine that the market is about to go on a +10% roll, then you would have less funds (the amount locked in under loan) to take advantage of your hunch. otherwise, no loss of investment opportunity there.

someone else can do a better job of explaining the pre-tax/after-tax repayment thing, i'm not good at math. i try to boil things down to a simple yes or no answer.

if you had a choice to pay yourself 2.5% or the bank 5.25%, which would you rather do?

tsp balance is just funny money anyway. does you no good until you actually retire. many a slip twixt the cup and the lip, might not ever get there. i live for the moment, you only have so many of them. besides you can't eat your tsp balance. well, you can eat the statements it's written on, but not very satisfying. and if you opt for electronic delivery only to save paper and the planet, then all you get is to lick the monitor. no soup for you.

[burrocrat]

http://www.youtube.com/watch?v=WZ3AOmZ2fps

[PessOptimist]

Thanks for the reply, burrocrat. I still have not gone to the TSP site to look in to this since it was a thing that came up last night on a multiperson chat with friends/realtives. Definitely worth looking in to.

The pre-tax/after tax thing brings up another question. If I take this money out as a loan, do I have to pay tax on it like it's income?

One of the plus sides to this is that it becomes my obligation and the joint ownership house is "lein free" which could simplify future life situation changes. Hell, I am going to be the one paying it off anyway.

What I meant by there no longer being a tax advantage for interest paid is just that-last tax year the interest was not enough to use itimezed deductions based on other expenses. So that is not a player.

What I meant by "what funds does it get taken from". Obviously mine. I meant if I am say 20% in five funds, does the loan get sucked out of all five funds equally?

Any one else who has something to say, please do. I will go to TSP.gov and check this out further.

PO

[crws]

I have experience and will comment or pm you later...

QUOTE=PessOptimist;281611]Thanks for the reply, burrocrat. I still have not gone to the TSP site to look in to this since it was a thing that came up last night on a multiperson chat with friends/realtives. Definitely worth looking in to.

The pre-tax/after tax thing brings up another question. If I take this money out as a loan, do I have to pay tax on it like it's income?

One of the plus sides to this is that it becomes my obligation and the joint ownership house is "lein free" which could simplify future life situation changes. Hell, I am going to be the one paying it off anyway.

What I meant by there no longer being a tax advantage for interest paid is just that-last tax year the interest was not enough to use itimezed deductions based on other expenses. So that is not a player.

What I meant by "what funds does it get taken from". Obviously mine. I meant if I am say 20% in five funds, does the loan get sucked out of all five funds equally?

Any one else who has something to say, please do. I will go to TSP.gov and check this out further.

PO[/QUOTE]

[PessOptimist]

Looking on the TSP.gov site answered most of my questions. Amazing what you can find out by actually looking for yourself!

The only thing not perfectly clear is if the payroll deduction for payoff is before or after tax money. I am assumng after tax, but if so then does that portion of my TSP account still get taxed when I take distributions when I get old(er)? Or, is that one of the prices I pay for this loan?

This would have to be a general purpose loan, as residential loans to pay off existing mortgages are not allowed. That was always my intention anyway, get away from the mortgage company and the escrow account.

Yeah, I think I'm smart enough to remember to pay my taxes and insurance all by my self.

Some may say that it isn't legal to do this but as far as I can see I could take a general purpose loan for 50k and put it all on red down at Lone Butt casino. Course, Lone Butt was moved away from the Butte so Vee Quiva is closer. Course if I won I'd have to make it through Laveen and South Phoenix alive.

Since I'm doing so well this year with my TSP account (yeah the tracker reflects the real account) I can't see how I would lose more money.

This sounds like a good idea the more I look at it. Which is why all my alarms are going off. Danger, danger pessoptimist.

PO

[crws]

Looking on the TSP.gov site answered most of my questions. Amazing what you can find out by actually looking for yourself!

The only thing not perfectly clear is if the payroll deduction for payoff is before or after tax money. I am assumng after tax, but if so then does that portion of my TSP account still get taxed when I take distributions when I get old(er)? Or, is that one of the prices I pay for this loan?

This would have to be a general purpose loan, as residential loans to pay off existing mortgages are not allowed. That was always my intention anyway, get away from the mortgage company and the escrow account.

Yeah, I think I'm smart enough to remember to pay my taxes and insurance all by my self.

Some may say that it isn't legal to do this but as far as I can see I could take a general purpose loan for 50k and put it all on red down at Lone Butt casino. Course, Lone Butt was moved away from the Butte so Vee Quiva is closer. Course if I won I'd have to make it through Laveen and South Phoenix alive.

Since I'm doing so well this year with my TSP account (yeah the tracker reflects the real account) I can't see how I would lose more money.

This sounds like a good idea the more I look at it. Which is why all my alarms are going off. Danger, danger pessoptimist.

PO

Ok, here's my 2 cents, FWIW
When we took out our loan, the interest rate was 3.5%.
As far as I am able to tell by my pay stubs, all this is before tax deductions.
Correct me if I'm wrong, but a TSP loan is not considered a distribution so no tax is due.
I think that is the general idea behind the loan program, as it is your money that you already contributed before taxes,
so it remains that way unless you default on your loan, at which point you will get nailed for about 50%
of the original amount in early withdrawal penalties and tax.
The best thing for us was (wish I could say it was my astute planning, but ney) we borrowed just as the market started to peak and fumble in 2007.
So all the time the market was tanking hard, we were earning 3.5% and DCA'ing with every repayment. Not stellar, but a gain.
After refinancing last year, we restructured our contribution amount just above the level needed to get our match,
then added the 3 or 4% from that difference as an additional amount of repayment to our loan. Our total amount contributed to TSP remains the same,
but we lop about a year + off the term.
I regularly adjust my contribution allocation, as there are no limits to transactions, and only a day ahead of payroll is needed to process a change.
Using that and the <1% IFT's, I can shift enough back and forth to buffer the market if I have maxed my 2 IFT's for the month.
You can borrow about half of your TSP's worth.
There is no credit agency qualification or reporting, and as far as I know, it is not considered a debt, just a tax liability if not repaid as agreed.
Both you and your spouse will have to sign the agreement.
Before we applied, I IFT'd all our funds to G, then reallocated after the loan was disbursed.
At worst you would miss out on the compounding interest of 37k (decreasing as paid off) if the market went up more than (2.5% + 5.25%) during your loan,
at best, you would pay yourself the 7.75% and could DCA with your contribution allocation if the market tanked.
3 years is a fairly short timeframe to repay that chunk of change IMO, and I think you'd be hard pressed to find many economists
that would predict us rising to 2007 market levels in 3 years.
Given that, depending on your tolerance for risk, you might be able to squeeze 8% gains consistently,
however, turn on any investor news and the "experts" predict single digit returns well into 2012...
Do you need the credit history your house payments provide?
If not, and it were me, I think I could mentally justify that as "paying myself first" and do it.
GL

[Scout333]

This topic has been explored in great detail previously in the thread below-

Re: TSP Loan and repayment with taxed income

--------------------------------------------------------------------------------

Welcome aboard! Glad to see you're exploring your options. This topic has been gone over in great detail on this site. Suggest doing a little reading here and on the TSP.GOV site. Don't forget that when you take out money re a loan it is no longer invested. The 3 % interest is no big deal since you are paying yourself back if that makes sense. You would "lose" any potential profits on the money which is taken out as loan proceeds however or could avoid losses on these funds if you are invested and the markets go down. Lots to consider. If you really want to get confused throw in the tax considerations! Good luck! Feel free to ask your questions as we have some really smart folks here.

[crws]

This topic has been explored in great detail previously in the thread below-

Re: TSP Loan and repayment with taxed income


According to lite blue ePayroll the only pretax deductions noted for me are medical :

Thrift Savings Plan (TSP): 5% - (Regular) (figured as percentage of your base, no matter the actual amount of your pay.)

Health Plan Pre-tax: 105 BLUE CROSS AND BLUE SHIELD

FEDVIP Dental Pre Tax

TSP Loan: G

fyi

[crws]

This topic has been explored in great detail previously in the thread below-

Re: TSP Loan and repayment with taxed income

One more note:
TSP funds are tax-deferred, not pre-tax. That is what boxes 12-13 on your W-2 are for, adjusting your AGI for retirement plan contributions.
http://www.poliwogs.com/pictures/W-2.jpg

So although you pay back your TSP loan with taxed dollars, it is because you have already deferred taxes once on the dollars you borrowed.
You would pay back any consumer loan with after-tax dollars anyway, so that point is mute... ;)

[72Zorad]

If it helps I'll let you know the next time I'm taking a loan. I appear to be horrible at the overall TSP investing scheme as I'm at 5.74% total earned compound interest since 2003. However, I seem to be really good at picking the right time to take a loan. Twice I've taken loans just as the market goes down for extended periods. Nice thing about that is I'm effectively selling high, buying back at a lower rate, and paying my retirement account at least some interest. :cheesy: I'd hate to see my earned interest without the loans.

Now, if I could just figure out the rest of it......

72Zorad

[Scout333]

If it helps I'll let you know the next time I'm taking a loan. I appear to be horrible at the overall TSP investing scheme as I'm at 5.74% total earned compound interest since 2003. However, I seem to be really good at picking the right time to take a loan. Twice I've taken loans just as the market goes down for extended periods. Nice thing about that is I'm effectively selling high, buying back at a lower rate, and paying my retirement account at least some interest. :cheesy: I'd hate to see my earned interest without the loans.

Now, if I could just figure out the rest of it......

72Zorad

I'm with you on that one 72Z!:)

[James48843]

New TSP Loan Interest rate has fallen now to just 1.250%

March 2020

[1965Vintage]

I can't wait till I'm 59 1/2! I'm taking everything out of the TSP, paying the taxes and trading my money on my terms! I could have made over 50k in the last two days if I weren't tied to this two trades a month crap! I'm so mad I could chew nails and spit barbed wire.
TSP is a joke.

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