TSP Loan and resigning

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Moonshine$
Posts: 14
Joined: Wed May 14, 2014 8:50 am

TSP Loan and resigning

Post by Moonshine$ »

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?

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rcozby
Posts: 341
Joined: Mon Aug 11, 2014 12:14 pm

Re: TSP Loan and resigning

Post by rcozby »

You can, but you'll pay normal income taxes on the outstanding portion of the loan plus a 10% penalty.

crondanet5
Posts: 4330
Joined: Tue Aug 19, 2008 8:51 pm

Re: TSP Loan and resigning

Post by crondanet5 »

By taking your TSP Account out do you mean cashing it out or rolling it into a rollover IRA?

Moonshine$
Posts: 14
Joined: Wed May 14, 2014 8:50 am

Re: TSP Loan and resigning

Post by Moonshine$ »

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.

searight
Posts: 85
Joined: Wed Jan 16, 2013 8:56 am

Re: TSP Loan and resigning

Post by searight »

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

Moonshine$
Posts: 14
Joined: Wed May 14, 2014 8:50 am

Re: TSP Loan and resigning

Post by Moonshine$ »

Thanks for sharing, very helpful!

hulk
Posts: 147
Joined: Thu Sep 02, 2010 7:07 pm

Re: TSP Loan and resigning

Post by hulk »

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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