Repay loan or bump TSP up to 10% from 5%?

[Hybrid93Hatch]

I recently took a $10,000 loan out of my tsp account to take care of my debt. Basically didn't want to deal with a losing TSP account and personal debt. I feel much better dealing with only the struggling TSP account.

So, now I have the monthly credit card money to use (about $800). I am undecided if I should increase my contributions to 10% from 5% or put the 5% toward paying off the 5 year TSP loan.

Thoughts?

Thank you for any feedback!

PS <> I was paying on average $800 p/mth for the last several months to eliminate the debt. The $80 minimum payment would of took forever!

 

[XL-entLady]

I recently took a $10,000 loan out of my tsp account to take care of my debt. Basically didn't want to deal with a losing TSP account and personal debt. I feel much better dealing with only the struggling TSP account.

So, now I have the monthly credit card money to use (about $800). I am undecided if I should increase my contributions to 10% from 5% or put the 5% toward paying off the 5 year TSP loan.

Thoughts?

For what it's worth, and that may not be much, here's what I think.

First of all, guard against absorbing that $800 a month into your monthly spending! Next, you have stated two good choices for what to do with that $800. I think the decision rests with whether you are a buy-and-hold type of person, or whether you're willing to put the time into being a swing trader.

If you're a buy and holder, pay off your loan. If you're interested in the higher returns and are willing to put in the time to study the markets and be a swing trader, I would suggest increasing your contributions (which can be moved around in the TSP) rather than paying your loan off (which is gaining interest at the G rate). Then after you learn as much as you can about how to move your funds between accounts, consider using that money to open a trading account such as eTrade, where you have real-time transactions and can trade as many times as you're willing to pay the trading fee.

My 2 cents, and that may be all it's worth too!

Lady

 

[Guest2]

For what it's worth, and that may not be much, here's what I think.

First of all, guard against absorbing that $800 a month into your monthly spending! Next, you have stated two good choices for what to do with that $800. I think the decision rests with whether you are a buy-and-hold type of person, or whether you're willing to put the time into being a swing trader.

If you're a buy and holder, pay off your loan. If you're interested in the higher returns and are willing to put in the time to study the markets and be a swing trader, I would suggest increasing your contributions (which can be moved around in the TSP) rather than paying your loan off (which is gaining interest at the G rate). Then after you learn as much as you can about how to move your funds between accounts, consider using that money to open a trading account such as eTrade, where you have real-time transactions and can trade as many times as you're willing to pay the trading fee.

My 2 cents, and that may be all it's worth too!

Lady

Very well put Lady ! I was wondering if his contribution allocations are
100% (G), spread out amongst all risk funds or going to the (L) Funds.
I think it adds to the calculations as a loan is paid back into the same
funds that he had allocated at the time of the loan. Food for thought!

 

[Frixxxx]

Very well put Lady ! I was wondering if his contribution allocations are
100% (G), spread out amongst all risk funds or going to the (L) Funds.
I think it adds to the calculations as a loan is paid back into the same
funds that he had allocated at the time of the loan. Food for thought!

Don't forget about taxes. If you need a tax break for the year, max your contributions. If not...Why pay interest any longer? All you did was lower your interest..Pay-off that loan and be debt-free!!!!!

 

[Hybrid93Hatch]

For what it's worth, and that may not be much, here's what I think.

First of all, guard against absorbing that $800 a month into your monthly spending!

That is one reason I want to get started with extra loan payment or bump up the contribution.

Next, you have stated two good choices for what to do with that $800. I think the decision rests with whether you are a buy-and-hold type of person, or whether you're willing to put the time into being a swing trader.

Not sure what the difference is between a "buy-and-hold" & "swing trader", but I pretty much kept my TSP steady at 45% S / 45% I / 10% G. I recently changed the account to 80% G / 10% each for the S & I. I am still not sure if that was a smart idea to move after already losing so much. I really do not know much about the stock market & TSP. If you have time, here is a thread I started with a few questions regarding TSP HERE

If you're a buy and holder, pay off your loan. If you're interested in the higher returns and are willing to put in the time to study the markets and be a swing trader, I would suggest increasing your contributions (which can be moved around in the TSP) rather than paying your loan off (which is gaining interest at the G rate). Then after you learn as much as you can about how to move your funds between accounts, consider using that money to open a trading account such as eTrade, where you have real-time transactions and can trade as many times as you're willing to pay the trading fee.

To be honest, I don't see myself adventuring out of the TSP market simply because I do not have the time it requires to learn the ins and outs of the market. I have enough on my plate as is. I don't plan on relying on the TSP when it comes to retirement, but to use it to enjoy the "finer" things in life.

My 2 cents, and that may be all it's worth too!

Lady

Thank you for your feedback. Well worth more than .02 ;-)

Very well put Lady ! I was wondering if his contribution allocations are
100% (G), spread out amongst all risk funds or going to the (L) Funds.
I think it adds to the calculations as a loan is paid back into the same
funds that he had allocated at the time of the loan. Food for thought!

At the time of the loan I was 45% S & I, 10% G. I am definitely going to work on knocking the loan out even though I did bump my TSP to 10%. I won't be able to put $800 a month to the loan with the 10% increase, but I will increase my overtime to put more toward the loan

Don't forget about taxes. If you need a tax break for the year, max your contributions. If not...Why pay interest any longer? All you did was lower your interest..Pay-off that loan and be debt-free!!!!!

With no dependents & filing single I need all the tax breaks I can get, lol. But, the interest I am being charged is being put back into my account from what I understand. I understand I am missing out on compound interest since the 10k is not present in the account. Am I subject to taxes / penalties from this loan when I withdraw the money once eligible?

Thanks again for all the feedback!!

 

[ATCJeff]

I recently took a $10,000 loan out of my tsp account to take care of my debt. Basically didn't want to deal with a losing TSP account and personal debt. I feel much better dealing with only the struggling TSP account.

So, now I have the monthly credit card money to use (about $800). I am undecided if I should increase my contributions to 10% from 5% or put the 5% toward paying off the 5 year TSP loan.

Thoughts?

Thank you for any feedback!

PS <> I was paying on average $800 p/mth for the last several months to eliminate the debt. The $80 minimum payment would of took forever!

I would take that $800 and make a monthly payment to your TSP loan. Your loan will be paid off in no time.

Here's the link to the form.
http://www.tsp.gov/forms/oc02-7.html ( I know the link will not work. It's located in your account, loans information, top of the page)

Jeff