Car Purchase

[cartmedl]

I am retired and have not yet tapped my TSP - no need to, until now. I need to purchase a car and looking for tax advice. Should I make a partial withdraw to pay for the car or request monthly withdraw and take out a loan? Loan rates are not favorable. Thanks in advance.

[Scarfinger]

I am retired and have not yet tapped my TSP - no need to, until now. I need to purchase a car and looking for tax advice. Should I make a partial withdraw to pay for the car or request monthly withdraw and take out a loan? Loan rates are not favorable. Thanks in advance.

My guess would to be... withdrawal as much as you can to keep you under the next tax bracket and use that for the down payment so you can take out a smaller loan for more affordable car payments.

[cartmedl]

Scarfinger - thanks! That is a good idea and I'll work those numbers up tonight to make sure I don't step into the next TB.

[alpe9942]

I am retired and have not yet tapped my TSP - no need to, until now. I need to purchase a car and looking for tax advice. Should I make a partial withdraw to pay for the car or request monthly withdraw and take out a loan? Loan rates are not favorable. Thanks in advance.

My guess would to be... withdrawal as much as you can to keep you under the next tax bracket and use that for the down payment so you can take out a smaller loan for more affordable car payments.

If you have Roth TSP, you don’t need to worry about taxes when withdrawing from TSP.

[evilanne]

Other factors you may want to consider:
Current lower tax rates from TCJA are good through end of 2025
Your account balance/type, how close you are to RMDs and how that will affect your tax bracket (once RMDs kick in you have little control over managing the amount and you may end up in higher tax bracket)
Your filing status, MFJ is double Single Tax Brackets

[bloobs]

I am retired and have not yet tapped my TSP - no need to, until now. I need to purchase a car and looking for tax advice. Should I make a partial withdraw to pay for the car or request monthly withdraw and take out a loan? Loan rates are not favorable. Thanks in advance.

Thinking out of the box here: how about a HELOC to finance the entire car?

Assuming that you:
- Can qualify for one,
- get a HELOC that has one of those no-closing costs/fee structures (they exist);
- You predict that interest rates will begin dropping from their presently high rates during the course of the repayments

This option will leave your TSP funds and/or high yield bank balances to continue growing, and most importantly the HELOC being a loan there will be NO tax implications.

The drawback is that APRs are high presently but if rates are topped out and set to decline, the loan's APR will AUTOMATICALLY adjust downwards as it drops in the coming years or maybe even beginning next year.

I havent done the math to quantify this of course