TSP Covid-19 loan.

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

TSP Covid-19 loan.

Post by ArrieS »

I was wondering if anyone has used the provision in the CARES act to make a TSP withdrawal. I'm thinking about doing it because you can repay it into any retirement account. Not the one you withdraw from.

I was just going to use it as a way to get money from my TSP into my ROTH IRA.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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bpdtoor
Posts: 5
Joined: Wed Mar 30, 2016 8:27 am

Re: TSP Covid-19 loan.

Post by bpdtoor »

TSP CARES Act Withdrawal

As authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), the TSP is allowing participants who have been adversely affected by the COVID-19 pandemic to take a special withdrawal of up to $100,000. The requirement that an active participant must be at least 59 ½ or meet any other hardship criteria than those listed below is waived for purposes of this withdrawal. Both active and separated participants may receive this withdrawal without having money withheld for federal taxes. Visit irs.gov or consult a tax advisor for information about the tax treatment of this and other coronavirus-related withdrawals.
To be eligible, you must meet one or more of the following three criteria:

I. You have been diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention.
II. Your spouse or dependent (as defined in section 152 of the Internal Revenue Code of 1986) has been diagnosed with such virus or disease by such a test.
III. You are experiencing adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury (or the Secretary's delegate).

I applied and received my loan. IMO the wording at the end of paragraph 3 covers everything.
Anyway I applied and received my loan , no problems.

Scorpio70
Posts: 432
Joined: Thu Dec 24, 2015 11:49 am

Re: TSP Covid-19 loan.

Post by Scorpio70 »

I took money out to put up Solar Panels. I did not claim any of those things. Paying cash still better than the 25% interest rate they wanted.

soccermoth
Posts: 26
Joined: Mon Mar 02, 2020 11:09 am

Re: TSP Covid-19 loan.

Post by soccermoth »

ArrieS wrote:
I was just going to use it as a way to get money from my TSP into my ROTH IRA.

I am intrigued by this idea. I haven't found any information saying this is an option, but I think you are suggesting that nothing says you can't take out $100,000 from your regular TSP and then repay it back to your Roth TSP? I think this would be a taxable event when we file our 2020 taxes. I wonder how we would figure out our basis to determine the gain?

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: TSP Covid-19 loan.

Post by ArrieS »

soccermoth wrote:
ArrieS wrote:
I was just going to use it as a way to get money from my TSP into my ROTH IRA.

I am intrigued by this idea. I haven't found any information saying this is an option, but I think you are suggesting that nothing says you can't take out $100,000 from your regular TSP and then repay it back to your Roth TSP? I think this would be a taxable event when we file our 2020 taxes. I wonder how we would figure out our basis to determine the gain?
No, not a ROTH TSP, but a ROTH IRA. A different account. Yes, the amount of your money that is traditional should be taxable that is rolled over to a ROTH IRA. I have been meaning to call and ask if I can direct the withdrawal from ROTH TSP funds only. That way there will be no taxable event.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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bamablue
Posts: 246
Joined: Tue Jul 24, 2012 11:40 am

Re: TSP Covid-19 loan.

Post by bamablue »

This thread got my attention... I think the idea of loading $100K into a Roth account is an unbeatable opportunity.

I currently don't have my TSP Roth account... I see some instructions that say to create the account through "MyPay"... is that it?

Since I'm within 5 years of retirement, creation of a Roth account wasn't much of a consideration (I have been contributing to Roth mutual fund accounts). I assume I would apply for the TSP loan after this account is established.

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: TSP Covid-19 loan.

Post by ArrieS »

bamablue wrote:This thread got my attention... I think the idea of loading $100K into a Roth account is an unbeatable opportunity.

I currently don't have my TSP Roth account... I see some instructions that say to create the account through "MyPay"... is that it?

Since I'm within 5 years of retirement, creation of a Roth account wasn't much of a consideration (I have been contributing to Roth mutual fund accounts). I assume I would apply for the TSP loan after this account is established.
With my agency just electing ROTH contributions was all that was required.

You can only borrow against what you have. So if you have no or a small Roth balance you can't borrow much, if anything.

I'm using the withdrawal option and not the loan. The loan needs to be repaid while the withdrawal doesn't. That way I can rollover the funds.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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bamablue
Posts: 246
Joined: Tue Jul 24, 2012 11:40 am

Re: TSP Covid-19 loan.

Post by bamablue »

ArrieS wrote:
bamablue wrote:This thread got my attention... I think the idea of loading $100K into a Roth account is an unbeatable opportunity.

I currently don't have my TSP Roth account... I see some instructions that say to create the account through "MyPay"... is that it?

Since I'm within 5 years of retirement, creation of a Roth account wasn't much of a consideration (I have been contributing to Roth mutual fund accounts). I assume I would apply for the TSP loan after this account is established.
With my agency just electing ROTH contributions was all that was required.

You can only borrow against what you have. So if you have no or a small Roth balance you can't borrow much, if anything.

I'm using the withdrawal option and not the loan. The loan needs to be repaid while the withdrawal doesn't. That way I can rollover the funds.
Thank-you. It sounds like I would need to use the withdrawal from the traditional TSP and transfer into a newly established Roth account. That would be fine for me. I know that the Roth account needs to sit at 5 years from 1 January of the contribution year before the money can be withdrawn tax free. The $100K could be a nice kick-start for the Roth.

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Re: TSP Covid-19 loan.

Post by ArrieS »

bamablue wrote:
ArrieS wrote:
bamablue wrote:This thread got my attention... I think the idea of loading $100K into a Roth account is an unbeatable opportunity.

I currently don't have my TSP Roth account... I see some instructions that say to create the account through "MyPay"... is that it?

Since I'm within 5 years of retirement, creation of a Roth account wasn't much of a consideration (I have been contributing to Roth mutual fund accounts). I assume I would apply for the TSP loan after this account is established.
With my agency just electing ROTH contributions was all that was required.

You can only borrow against what you have. So if you have no or a small Roth balance you can't borrow much, if anything.

I'm using the withdrawal option and not the loan. The loan needs to be repaid while the withdrawal doesn't. That way I can rollover the funds.
Thank-you. It sounds like I would need to use the withdrawal from the traditional TSP and transfer into a newly established Roth account. That would be fine for me. I know that the Roth account needs to sit at 5 years from 1 January of the contribution year before the money can be withdrawn tax free. The $100K could be a nice kick-start for the Roth.
If you did that you would owe taxes on the traditional withdrawal.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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