Using TSP funds to pay off mortgage


Q. I am thinking of retiring in about a year and will have approximately $310,000 in my Thrift Savings Plan account. The remaining cost of my mortgage is going to be about $140,000. Is using the TSP funds to pay off the mortgage an option? How much would I be taxed if I opted to go this route? If this does not sound smart, please suggest a smarter idea that I might use.

A. It is an option, but the money will be taxed as ordinary income and may be subject to the early withdrawal penalty, depending on your age. If the interest rate on your mortgage is well above the current market rate, then you may want to consider doing this. If not, I think you should leave your money in the TSP as long as you can. You can set up monthly distributions to support your retirement spending needs, if necessary.


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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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