Withdrawal of TSP funds to pay off credit card


Q. I will be 58 in May. I have a massive credit card bill that is causing me huge amounts of stress, and it is costing me $100 per month in interest. No, I wasn’t frivolous in my spending, I have a disabled daughter who I have been helping out in addition to her two service dogs. Can I take money out to pay off the credit card even though I currently have an outstanding TSP loan? Or can I cancel my loan and use that $300 per month to add to my credit card debt? If I could do that, then I could pay $700 per month toward my credit card to pay it down. I do not want to be penalized by not being able to contribute to TSP or have government matching. I just need a way to pay down or pay off this massive credit card debt. My TSP account is small (only $68,000) so it really isn’t going to help me in retirement, which is in four years.

A. While you are in pay status, you can’t stop making payments against your loan since they are automatically deducted from your pay. Your only option might be to qualify for an in-service withdrawal based on financial hardship, but this can be hard to prove and you will be hit with the early withdrawal penalty unless you qualify for one of the exceptions listed on Page 7 of the notice at https://www.tsp.gov/PDF/formspubs/tsp-536.pdf.

See the rules for in-service withdrawals here: https://www.tsp.gov/PDF/formspubs/tspbk12.pdf.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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