Most financial publications are against borrowing from your 401K/TSP for various reasons (lost growth opportunity, need to pay within 60 days if separated from job, double taxation on interest) but are their circumstances where it is a “smart decision” to borrow from your TSP?
Or where timing is good?
I borrowed $19K from my TSP on 3/28 and 100% S fund, and shares were sold at 34.0495 and as of yesterday 4/16 the S fund price is 33.6592. If shares are being bought with my loan payments at cheaper than what they were sold at is it actually a good thing assuming it eventually goes higher?
Is it just dumb luck that the market took a dive right after your TSP loan or could someone borrow the max $50k and then just sit on it (making the smallest repayments bi-weekly) and then immediately make a coupon payment for the entire balance during the bottom of a correction? Could one with skill in charting make an educated TSP loan that was wise and not have to worry about utilizing an IFT to G fund and gaining more shares when the money is put back?
And lastly after one has repaid a TSP loan is there a way to calculate the actual cost of it? Maybe calculating all the loan repayment shares purchased?
What is the real cost of a TSP/401K Loan?
Moderator: Aitrus
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silentness
- Posts: 16
- Joined: Wed Sep 19, 2012 4:32 pm
Re: What is the real cost of a TSP/401K Loan?
I actually borrowed $5k from my TSP before. It was an emergency at the time, but I sold my shares when the S-Fund was really high. When I had got a bonus, I repaid the loan back with one check.
Get this... when I repaid the loan, the S-fund was at the tail-end of a correction. So I was buying my $5k worth of shares back for real CHEAP. So IMO I actually came out ahead, even with the $50 loan processing fee.
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Now obviously no one can time the market, but there are some occasions when taking a loan isn't doom & gloom on possible market returns.
Get this... when I repaid the loan, the S-fund was at the tail-end of a correction. So I was buying my $5k worth of shares back for real CHEAP. So IMO I actually came out ahead, even with the $50 loan processing fee.
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Now obviously no one can time the market, but there are some occasions when taking a loan isn't doom & gloom on possible market returns.
Re: What is the real cost of a TSP/401K Loan?
It is dumb luck, but you are right, between the S fund drawback (assuming it continues to rise) and the interest you're paying yourself, you actually did yourself a favor here OP!
Re: What is the real cost of a TSP/401K Loan?
pull out and buy gold, its dipping again and a buying opportunity is getting close
Fund Prices2024-04-18
| Fund | Price | Day | YTD |
| G | $18.19 | 0.01% | 1.27% |
| F | $18.62 | -0.30% | -3.14% |
| C | $78.45 | -0.21% | 5.50% |
| S | $76.12 | -0.20% | -1.27% |
| I | $40.67 | 0.02% | 1.21% |
| L2065 | $15.58 | -0.13% | 3.04% |
| L2060 | $15.58 | -0.13% | 3.04% |
| L2055 | $15.58 | -0.13% | 3.04% |
| L2050 | $31.35 | -0.13% | 2.44% |
| L2045 | $14.32 | -0.12% | 2.35% |
| L2040 | $52.37 | -0.11% | 2.29% |
| L2035 | $13.85 | -0.10% | 2.21% |
| L2030 | $46.21 | -0.09% | 2.15% |
| L2025 | $12.93 | -0.05% | 1.72% |
| Linc | $25.28 | -0.04% | 1.51% |