The Thrift Savings Plan was designed to provide you with income after you

retire. The amount you will have in your account depends on the decisions you

make -- how much you contribute, how you invest, and whether you take money out

of your account before retirement.

The Thrift Savings Plan loan program is an important benefit that allows

participants access to the money in their accounts. However, taking a loan could

result in less money for you at retirement. So, before you borrow from your

account, consider the following:

1. 1. If your TSP investments earn higher rates of return than the interest rate

   on the loan, the loan interest you pay will not be equal to the earnings you

   would have received if the money had remained in your account. This means that

   your TSP account will be smaller than it would have been if you had not borrowed

   from it.
   
   

2. If you are not able to contribute as much to the TSP because of the

   financial burden of your loan payments, your TSP account will not grow as

   quickly. If you are a FERS employee and you have to reduce your contribution

   rate to below 5%, you will also give up agency matching contributions.
   
   

3. A TSP residential loan is not a mortgage. Therefore, the TSP loan interest

   payments are not tax deductible, as they might be for a mortgage or home equity

   loan.
   Before you take a TSP loan, make sure you realize its potential effect

   on your retirement income and decide whether it makes more sense to borrow from

   another source.

Before you take a TSP loan, make sure you realize its potential effect on

your retirement income and decide whether it makes more sense to borrow from

another source.

Source:  TSPBK04 (6/06)