TSP Loan and resigning
Moderator: Aitrus
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- Posts: 14
- Joined: Wed May 14, 2014 8:50 am
TSP Loan and resigning
I will be resigning (moving on to a new career) in a few weeks. I have a TSP loan to payoff.....I'm wondering if I can take my TSP account out w/o paying off the loan. Does anyone know?
Re: TSP Loan and resigning
You can, but you'll pay normal income taxes on the outstanding portion of the loan plus a 10% penalty.
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Re: TSP Loan and resigning
By taking your TSP Account out do you mean cashing it out or rolling it into a rollover IRA?
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- Posts: 14
- Joined: Wed May 14, 2014 8:50 am
Re: TSP Loan and resigning
If I rollover, I can't touch it, right? Then I'd have to payoff the loan first so I won't get taxed on it.
Re: TSP Loan and resigning
According to TSP, you have 90 days from date of separation to repay your loan in full or it becomes a taxable disbursement. Here is the pamphlet to explain. https://www.tsp.gov/PDF/formspubs/tspbk04.pdf
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- Posts: 14
- Joined: Wed May 14, 2014 8:50 am
Re: TSP Loan and resigning
Thanks for sharing, very helpful!
Re: TSP Loan and resigning
If you can afford it, within 90 days of not paying off the loan, you can set up a regular IRA where you can invest in most anything you want. You still will be issued a F1099 but since you put the full amount of the loan into another regular IRA no tax will be due. If you do not do this, you will be taxed (like I will be since I just retired without paying off the loan or creating an IRA). Remember there are many exceptions to the 10% penalty (mine will be that I am retirement eligible).
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