Using a current TSP balance to pay off a TSP loan?

[OlsonusMaximus]

I was curious if there was a way to transfer my current TSP amount and pay off an old TSP loan that I took out previously.For example: I have $5,000 in my TSP fund right now and I wanted to take all of it to pay off the remainder of a TSP loan which is only $4,000, leaving me with a balance of $1,000 in my account.Is this possible or am I stuck paying off the loan for three and a half years?Thanks in advance!

 

[craigerv]

So you want to pay off a loan from TSP with another loan from TSP? I'm not sure that would work. I think if you don't want to pay off the remainder of or your loan, you can just accept an early withdrawal penalty and get uber-taxed on that money, but I think it would be a lot easier and less costly to just pay it back when you have the money.

 

[James48843]

I was curious if there was a way to transfer my current TSP amount and pay off an old TSP loan that I took out previously.For example: I have $5,000 in my TSP fund right now and I wanted to take all of it to pay off the remainder of a TSP loan which is only $4,000, leaving me with a balance of $1,000 in my account.Is this possible or am I stuck paying off the loan for three and a half years?Thanks in advance!

You are basically stuck.

The only way to do it is through an emergency hardship withdrawal, and you probably would either not meet the criteria, or, if you did, you would end up paying through the nose to do it and it would not be worth doing.

IF you tried to take the balance money out (and you are under retirement age), they only way to do that is to request a hardship withdrawal, which would allow you to take money out of your account, but would then hit you with BOTH taxes at the current tax rate, PLUS an early withdrawal penalty of 10% of the amount, PLUS it would make you stop contributions to your account immediately for a period of time. It is intentionally VERY COSTLY to have to do such an action- so over something as small as $5,000 it is not worth the hassle of doing.


See the "Hardship withdrawal page" for details:
https://www.tsp.gov/planparticipation/inservicewithdrawals/financialHardship.shtml

 

[Show-me]

No way they will allow this, you are stuck once you dip into the TSP and they don't give you a way out period. That is the price you pay for dipping into your retirement account. They only allow you to take money out on a hardship, natural disaster type or medical type and even then you still pay a penalty to the IRS.

 

[wavecoder]

You are basically stuck.

The only way to do it is through an emergency hardship withdrawal, and you probably would either not meet the criteria, or, if you did, you would end up paying through the nose to do it and it would not be worth doing.

IF you tried to take the balance money out (and you are under retirement age), they only way to do that is to request a hardship withdrawal, which would allow you to take money out of your account, but would then hit you with BOTH taxes at the current tax rate, PLUS an early withdrawal penalty of 10% of the amount, PLUS it would make you stop contributions to your account immediately for a period of time. It is intentionally VERY COSTLY to have to do such an action- so over something as small as $5,000 it is not worth the hassle of doing.


See the "Hardship withdrawal page" for details:
https://www.tsp.gov/planparticipation/inservicewithdrawals/financialHardship.shtml

sounds like the taxes and penalties are a hardship in itself, damn

 

[burrocrat]

there are a couple work arounds. tsp will not allow you to take a new loan of the same type until 60 days after paying off the old one.

can you hustle interim financing for a couple months? borrow from other source and pay off tsp loan, 60 days later take new tsp loan for higher available amount and payoff bridge loan. keep the difference. mom? favorite aunt? ex-girlfriend's parents? ex-girlfriend in exchange for a little humility and a hugandsqueeze every two weeks until paid off? get creative.

if you've bought a house in the last two years you can take out a real estate tsp loan, pay off the general loan, keep the difference.