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My wife got a new job, and we need a second car. I'm interested in financing, but my I'm a fed and TSP offers me the ability to loan myself money from my retirement account. To quote from the brochure: quote:When you borrow from your TSP account, the loan is disbursed proportionally from any traditional (non-Roth) and Roth balances in your account. Similarly, if you are a uniformed services employee with tax-exempt contributions in your traditional balance, your loan will contain a proportional amount of tax-exempt contributions as well. If your TSP account is invested in more than one fund, your loan is deducted proportionally from the employee contributions (and earnings on those contributions) that you have in each fund. Your total account balance is decreased by the amount of your loan. Rate's 2.125%. Does it make more sense to do this than go through a bank, given that I'd at least be paying myself interest instead of a bank? The significant downside is that I'm loaning myself pre-tax dollars and paying myself back post-tax dollars.
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Nov 30, 2014 03:56
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| # ¿ May 15, 2024 23:35 |
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Apples to apples, any loan I take is being paid back with post tax dollars, and I'm not too concerned with the productivity of my account; it is still growing at 2% interest, and although I forego higher gains, I'm insulated from loss. At 2% anyway, the "don't finance" adage seems to lose its power: $300 interest a year over 5 years ain't poo poo when you make $58/hr.
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Nov 30, 2014 17:31
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"yes, let me sell stocks instead of paying sub-2% APR" said no one ever
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Dec 1, 2014 04:19
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my credit was 840, but thanks anyway: a) I already bought the car at 1.95% bank note b) saving up wasn't an option because I needed the car in a week because my wife got a job offer out of the blue that pays $17k more but will require her to commute via car instead of public transit and it starts on the 8th Purchase price of $20k My options were: 1) Pay cash, which would have meant using 3 months' worth of 6 months' expenses of cash on hand 2) Sell stocks, foregoing market gains on that money until it's replenished over time (although I'll get market on income as I invest it, I probably wouldn't replace the full $20k for about a year given planned future expenses for the upcoming year for home improvements) 3) Loan from TSP, foregoing market gains on that money for 2.1% starting immediately 4) Bank loan, cost of loan over lifetime of loan is $800 I did 4. I can always go back and do any of 1-3 to pay off the bank note immediately.
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Dec 1, 2014 15:22
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only concern I have with that would be possible government shutdown affecting my paycheck
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Dec 1, 2014 19:22
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