TSP Loans and In-Service Withdrawals

There are two types of TSP loans — general purpose and residential. The former can be repaid over one to five years and the latter over one to 15 years. No documentation is required for a general purpose loan but you must submit documentation to support the amount of a residential loan request. You can have two loans outstanding at any one time, but only one of each. There is a $50 processing fee per loan, which is deducted from the loan amount.

When you take a TSP loan, you are borrowing from yourself. The minimum amount is $1,000 and the maximum depends on various factors, including the amount you have contributed and IRS rules. The loan interest rate is the G Fund rate at the time you apply. Applications are made with Form TSP-20.

TSP Loans Repaid Through Payroll

Loans are repaid through payroll allotments over the payment period specified in the loan agreement. You may not take out a new loan for 60 days after paying off a loan.

If you leave federal service you must repay the loan in full, including interest on the outstanding balance to the date of repayment. If you do not repay the loan within the required time frame, the TSP will declare a taxable distribution, meaning you will be liable for taxes and penalties.

There are two types of allowable withdrawals while in service—age-based and financial hardship.

Age-based withdrawals are available to those age 59 1⁄2 or older. They can make a one-time in-service withdrawal from their accounts of at least $1,000, up to the vested amount of the account. Continued contributions to the TSP after making such a withdrawal are allowed while still employed. Age-based withdrawals are made using Form TSP-75.

Financial hardship withdrawals must be at least $1,000, up to the amount of your own contributions and their associated earnings or the amount of your demonstrated need, whichever is smaller. You must provide information on family income and expenses and supply documentation supporting the amount of your request (note: simplified procedures may be used temporarily for those affected by a natural disaster). After you make a financial hardship withdrawal, you cannot contribute to your TSP account for six months, meaning that for FERS employees agency matching contributions stop during that time as well. Hardship-based withdrawals are made using Form TSP-76.

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