Does using TSP to pay off loan exempt one from taxes?


Q: First question: My wife and I are both in the Thrift Savings Plan, and we intend to retire in nine years. I heard somewhere that if I used my TSP funds to pay off my home loan and land loan that it will not be taxed. Is this true? I am under the GL scale and will have 31 years of federal service and four years of military service at age 57. My wife works for the Postal Service and will have 20-plus years of service at age 55. My second question is, if I decide not to withdraw from our TSP to pay off our loans, what is the best way to get the most out of my TSP? I don’t believe in nor trust the stock market, or any risky investments.

A: To your first question, that’s not true. To your second question, the only TSP fund not subject to fluctuations in value is the G Fund, so by process of elimination, that is your only 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 and view his blog at

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