jayk7/Getty Images

What Not To Do With Your TSP Account

Be careful about borrowing from your retirement investments. 

If you’re covered under the Federal Employees Retirement System, investing as much of your salary as you can afford in the Thrift Savings Plan is essential to ensuring a comfortable retirement. And it’s not only important to get your money into the TSP, but to keep it there.

At the end of last year, there were more than a quarter of a million outstanding TSP loans, totaling about $4.5 billion. When you borrow from your TSP, the money comes out of your account balance in proportional amounts from traditional and Roth investments. For example, if 80% of your account is in your traditional balance and 20% is in your Roth balance, then 80% of the amount you borrow will be from your traditional balance and 20% will be from your Roth.

You’ll be paying the loan back to yourself with interest (computed at the G Fund rate when the loan is approved). But by temporarily taking money out of your account, you’ll miss out on some of the compound earnings you could otherwise have accrued.

You must start repaying your TSP loan with interest within 60 days of when it is disbursed to you. Your payroll office will begin deducting loan payments from your salary each pay period. Be sure that these payments won’t cause you to reduce your new contributions and drop you below the 5% required contribution in order to receive the full agency match. 

Here are a few other important facts about TSP loans:

  • You’ll pay a one-time fee of $50 for a general purpose loan or $100 fee for a primary residence loan. 
  • As of June 1, 2022, loans may only be reamortized to a longer or shorter payment period if you have transferred to an agency with a different pay cycle. 
  • You can make loan payments in addition to payroll deduction to pay off your loan more quickly or to make up for missed payments. This can be done by direct debit a maximum of two times per month or by check or money order at any time. 
  • A direct deposit account or mailing address must be added to your account at least seven days (not including weekends and holidays) before you submit a loan request.
  • When applying for a TSP loan, you should confirm your marital status. If you’re divorced, you should contact the TSP ThriftLine to update your status to single. A spousal signature is required if your TSP account information still shows your status as married.
  • If you have an outstanding loan when you separate from federal service, you have three options: First, you can pay the loan off. Or you can keep the loan active by setting up monthly payments by check, money order or direct debit. The terms of the loan do not change when you separate, and the maximum time limit for paying off your loan still applies. Finally, you can allow the loan to be foreclosed and accept any taxable portion of the outstanding balance and accrued interest as taxable income.

You can’t take a new loan after you leave the government. Before you decide to apply for a TSP loan, be sure to carefully read the TSP booklet on loans

While we’re on the subject of the TSP, here are some additional things to know:

  • Although the full dollar amount of your contributions to a traditional, pre-tax TSP account goes into your account, your net income may not go down by the same amount. This is because your contributions reduce your taxable income. It’s possible your federal and state tax withholding will go down when your TSP contributions go up.
  • If you expect to be paying a higher tax rate in retirement than you are today (due to higher income later in life or changes in the tax laws), you might want to make  after-tax contributions to a Roth TSP account. These contributions will not lower your current tax bill, but will provide you with some tax-free income later in life.
  • To make changes to your TSP contributions, contact your agency payroll provider.
  • All of the agency matching money placed in your account is immediately vested. This means it belongs to you even if you leave federal service before becoming eligible for a FERS retirement. The 1% automatic agency contribution will be yours once you have completed three years of service. 
  • Employees hired on or after Oct. 1, 2020 were automatically enrolled in the TSP at the 5% contribution amount. 
  • The maximum TSP contribution amount for 2023 is $22,500 for employees who are under age 50, and $30,000 for those who will reach age 50 in 2023 or above.
X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.