Q. I plan on retiring in December 2017. I have $450,000 in TSP. I would like to take out half to purchase a home. Does this make sense? The interest saved by no loan payments would be more than the amount of tax paid.
A. There is no one-size-fits-all answer to your question. The answer depends upon how you will manage your TSP investment and your access to attractive borrowing terms. If I were managing your TSP account and your objective is to maximize your lifetime standard of living, I would favor taking a fixed-rate loan to withdrawing the funds. I am willing to bet that I can get more spendable, inflation-adjusted income out of your account over your lifetime than you will save in after-tax interest expenses, but that might not be a bet you should make.
