TSP Loans

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jedi757
Posts: 20
Joined: Sat Oct 05, 2013 12:15 pm

TSP Loans

Post by jedi757 »

I called TSP today b/c I couldn't navigate around their horrible website to find some of my contributions which in turn lead me to question my TSP loan. I always thought when you made contributions to TSP your money bought shares and when you got a loan those shares were sold to provide the funds for the loan. The TSP rep said no, that the loan money comes out of your contribution total and no shares are sold. I cannot wrap my head around this. I thought I owned shares, and each pay day bought more shares and that there is no cash piled up anywhere. Either she is confused OR I'm completely now NOT understanding TSP at all. My husband has total TSP contributions (his and employer) of $42k since 2019 but in 2024 he now has a balance of $93k. My total lifetime contributions since 2004 is $268k but I only have $374k. It seems his account is growing quicker than mine so I called asking if my account has been frozen, as in some non pay status or something. I was thinking if it was frozen I may not be earning anything. So this is where she explained to me that I'm only getting growth on the $268k minus the $50k I borrowed. My head is now spinning. Does anyone understand TSP Loans? If this is the case then I may be better off with a higher rate HELOC.

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Scarfinger
Posts: 831
Joined: Mon Jan 30, 2012 12:00 am

Re: TSP Loans

Post by Scarfinger »

It depends if you are invested in the same funds at the same percentages and investing the same amounts, then your gains would be the same.

And you can't compare 2019 to 2024 and 2004 to 2024, they are two completely different time periods and you would have deferent results even if you are in the same funds at the same percentage.

Historical stock market gains are around 9%. So if you can get a loan under 9% and plan on taking 100 years to pay it back, it may be beneficial to get a HELOC?? Otherwise in general they suggest that you try not to take out loans on your 401K because you will not be able to make any gains on that money until it is paid back.

Grossly: stock market gains for 2019 to 2024 is 12.34% annual returns and 2004 to 2024 was 10.12% annual returns.

If your husband has more money in stocks, he should have earned a higher return for those years. And if he invested a high percentage of his income it would look like he made even more just because he put more money in than you did.

Also if you had more of your money in G/F fund you would have gained less than the 10.12% annual returns.

There is really a lot of missing data to give you a correct answer. The new website makes it easy to get a portfolio statement so you can look at all the numbers and investments ratios.

Of course I am no expert. Take my advise with a grain of salt.

Best of luck figuring it out.
I am just an average Joe. I have no clue to what the market will do.
TimboSlice wrote: "People really need to stop overthinking this."
Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund or variation of

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mjedlin66
Posts: 1623
Joined: Wed Oct 02, 2013 7:51 pm

Re: TSP Loans

Post by mjedlin66 »

The TSP rep is wrong. When you take out a TSP loan, yes, your shares are sold to fund the loan at the current price. Then as you make payments, you buy shares back at the current price.

Contributions and loan payments have nothing to do with each other.

The rules which decide your maximum loan amount take into account how much of your account is contributions and how much is earnings. Maybe that is why she is confused.
Owner/creator of TSPcalc.com - "Know your numbers"

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