|To Loan or not to loan
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|Author:||Timber82 [ Thu Jul 13, 2017 2:28 pm ]|
|Post subject:||To Loan or not to loan|
So I know the story and I have preached it many times too to not touch your retirement money unless you absolutely must do it. But I think I may have a situation that gives merit to the idea. I will share some numbers and my logic. Please correct me if my logic is flawed I.e. I misunderstand a rule about TSP loans or something.
So my situation - I have a USAA credit card and back in July of last year I was offered a "Promotional APR of 1.9% interest on all purchases and convenience check transactions until the end of the month." So I paid my card balance to $0 and did a convenience check for around 15K. now you might be banging your keyboard thinking you stupid moron! But I took this money knowing I could make more than 1.9% so I basically margined my credit card if you want to think of it like that. Meanwhile the investment has been humming along and I have just paid the minimum payment back.
Slowly over the year as I bought in and left it alone in my personal trading profile I have amassed around 2.5-3K in profit or about 16%. As my year period is coming due soon It will be time to pay it back down before the normal interest rate (9.9%) kicks in. This is where my dilemma lies. Due to the way I scaled into my investments If I wait until October then I would be at the Long term capital gains cutoff, if I take it out now to pay it back down I would lose some of my profit to Short term capital gains.
So my thought, take the money out of the TSP to pay the debt down to 0 and in October withdraw the stock purchases at the long term capital gains amount and pay my loan off and keep whatever profit. For this to work I am assuming that I have read correctly that TSP loans do not count as taxable income so long as it is paid back.
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