What should you know about loans from the Thrift Savings Plan? The following 16 items cover the most important areas.

1) Only employees can have TSP loans. Retirees are not allowed to apply for a TSP loan.


2) TSP loans are taken proportionately from your account based on its allocation. For example, if you were equally invested in the five basic funds (C, S, I, F and G) and borrowed $50,000, an amount of $10,000 would come from each fund.

3) Unless you specify otherwise, your loan will be taken proportionately from your traditional and Roth balances.

4) $50,000 is the maximum amount that can be outstanding in loans at any time. This is an IRS rule and applies to all 401(k) type plans. If your account balance is less than $100,000, the limit that can be borrowed is ½ of your account balance. The CARES Act has temporarily increased the maximum amount available to $100,000.

5) You are not allowed to take a loan from an Individual Retirement Arrangement (IRA).

6) There are two types of TSP loan: general purpose and primary residence. You can have no more than one loan of each type outstanding at a time and the total amount that is outstanding cannot exceed limits listed above in number 4.

7) A general purpose loan can be amortized for no more than five years and requires no documentation.

8) The interest rate is determined by the G Fund rate on the day the loan agreement is approved. In April 2020, the rate was 0.875%.

9) You need your spouse’s signed, notarized consent for a TSP loan.

10) A court order will bar you taking a loan.

11) For a residential loan you will need to document the costs associated with the purchase or construction of a primary residence and submit that documentation to the TSP. You can find the requirements (as well

as a lot more valuable information on TSP loans) in the TSP booklet Loans https://www.tsp.gov/PDF/formspubs/tspbk04.pdf.

12) As you repay your loan, your payments are invested in the TSP based on your most recent contribution allocation.

13) You cannot take a loan if you have repaid another loan of the same type within 60 days.

14) You cannot take a loan if you have received a taxable distribution on another TSP loan within the previous 12 months.

15) If you leave federal service with an outstanding loan, you will be asked to repay the loan. The TSP will contact you with the date by which the loan must be repaid. If you do not re-pay the loan, the TSP will declare it to be a taxable distribution and will notify the IRS of such.

16) In the event of your death, the outstanding balance becomes a taxable distribution.

12 Key Aspects of TSP Installment Payments

RMDs: TSP Suspends Required Minimum Distributions

22 Million Lost Jobs and Rising: A TSP Update

TSP Investors Handbook, New 6th Edition