Q. I am a federal employee who will be retiring Jan. 3 after 40 years of service at age 58½. I took a necessary loan on my Thrift Savings Plan and will still have a balance on my loan when I retire. I understand I have 90 days to pay back the loan or I will be taxed for the money owed.
I do not need my TSP money now. I would like to keep it there or invest somehow, not sure yet. I do not want to pay the money back, which makes no sense to me since I can take money from my TSP anytime now once I retire without a penalty. Do you think I will be better off to pay the money back to myself to avoid the taxes?
A. I generally recommend that you leave your money in the TSP and invest it there for as long as possible and practical. If you don’t repay the loan, you will not be able to return the money to the TSP later. You should repay the loan unless there is a good reason not to.
