06/06/06
TSP Loans: Final Thoughts
We've
almost finished the topic of TSP loans. This week we'll wrap
things up and tie up a few loose ends. (How's that for mixing
metaphors?) So, onward to some random and final thoughts...
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First,
www.tsp.gov has a nice
loan calculator:
http://www.tsp.gov/calc/loan/index.html. If you want to
estimate loan payments and the time required for repayment,
you'll want to look at this page. The only “inputs” you have
to enter are the loan's amount, type, term and pay schedule
(bi-weekly, monthly, etc.). The current interest rate is
already factored in.
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It will take a few weeks
to receive your loan. If you're in a hurry, complete your
application online. You may receive it earlier that way.
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An astute observation on
double taxation someone sent me via a PM: “Many people feel
that a TSP loan is the way to go because you are paying
yourself the interest. However you are doing so with
after-tax money. You pay taxes on it before you put it in,
and again when you take it out. It's a concept that is often
overlooked.”
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The loan will obviously
affect your TSP account balance. So you need to seriously
consider your entire financial picture (retirement, other
loan sources, etc.) before you get a TSP loan. Also, since
TSP funds have different returns, the loan's interest (G
Fund rate) will be different than the returns in your TSP
account. Unless you're one of the 100% G Fund-for-life
types..
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Finally, the article
linked below considers the pros and cons of 401(k) loans
(similar to TSP) to home equity loans:
John, AKA “SystemTrader”