Military TSP Loan thoughts

[Jonathan Roach]

I've been researching the details of taking a loan from my TSP to fund a BRRRR deal. It seems like a bulletproof strategy since I can pay the loan off within a few months if all goes well and the interest rate is embarrassingly low.

Has anyone else tried this or given it any thought?

[David Zeek]

I have used the loan twice, once to pay off some debt and the other was to help pay for a downpayment on an investment property. It is a fairly simple process, and since the COVID hit, you don't need to notarize anything. Overall, it was a good experience and easy to do. My only advice would be to have a deal already lined up before you take the money out of your TSP. I pulled the trigger on the loan before I had a deal line up and the cash just sat there for three months. It takes roughly five business days from when TSP receives your loan request to get the money in the bank. I recommend getting the deal first and then applying for the loan. This strategy will let your money work in the TSP, gaining value from the stock market, while you find a solid deal.

Another option to look at is the CARES act withdrawal, which I just did as well. It is a penalty-free, tax-free withdrawal from your TSP. You have to claim "hardship" from COVID....which can be anything from a family member diagnose w/COVID, to your wife has to stay home to watch the kids due to daycare being suspended, or you don't feel safe for your kids to go to daycare and your wife can't work because of it, etc. The only thing you have to take into consideration is that the money you take out can not exceed 100k and you have three years to claim it as "income" during tax season. Meaning, if you take out the max amount (100k) you can break it up in three-year chunks to claim (as income) it on your taxes.

Hope this helps.

Dave