TSP loan repayment versus other options


Q. I have a question about repayment of a TSP loan. I want to either up my TSP contribution to 10 percent ($384 a pay) or up my loan payment by $384. What is the better financial decision? Either way, the same amount of money is going into my account, so other than the tax effects is there a preferred option? What about using the $384 to pay off consumer debt? I could pay off a credit card in about six months if I added the biweekly amount I would put into my TSP to my credit card, but obviously I don’t want to make bad financial decisions.

A. There is no one-size-fits-all answer to your question. The best choice will depend upon you and your circumstances. Carrying credit card debt while you contribute to the TSP is like charging your TSP contributions to a credit card. While there might be scenarios where this is a good idea, I generally don’t like it. I favor paying down the credit card debt as the default option.


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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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