TSP Loans: What Federal Employees Need to Know Before Borrowing

Before taking out a TSP loan, federal employees should understand how borrowing from their retirement savings could impact their financial future. A TSP loan allows you to borrow from your own contributions, but it comes with risks. While it's an easy way to access funds for major expenses like a home purchase or unexpected emergencies, the loan reduces the amount earning interest in your account, potentially affecting your long-term retirement growth. Additionally, if you leave federal service before repaying the loan, the remaining balance may be taxed as a distribution. Weigh the pros and cons carefully to ensure borrowing from your TSP is the right move for your situation.