Choosing Between a TSP Loan and an In-Service Withdrawal

The following table compares how taking a TSP loan or making an in-service withdrawal would affect your account.

	Loan	In-Service Withdrawal
Cost to Participant	$50 loan fee No earnings on any outstanding loan amount	Retirement savings permanently reduced by amount of withdrawal No future earnings on amount withdrawn With financial hardship withdrawal, no employee contributions for 6 months (and no matching contributions, if you are a FERS employee); members of the uniformed services cannot contribute from incentive, special, or bonus pay
Effect on Taxes	None (unless loan is not paid back and the TSP declares a taxable distribution*)	Immediate tax liability (unless age-based withdrawal is transferred to an IRA or eligible employer plan) Possible additional 10% early withdrawal penalty tax
Effect on Earnings	No earnings on amount of loan until funds are repaid	No earnings on amount withdrawn With financial hardship withdrawal, no new contributions to accrue earnings for 6 months
Effect on Matching Contributions (FERS Only)	None	With financial hardship withdrawal, no matching contributions while employee contributions are suspended

* When the TSP declares a taxable distribution, the Internal Revenue Service (IRS) considers the unpaid balance (including any accrued interest) of the loan to be taxable income.

For more information about each program, visit TSP Loans and In-Service Withdrawals.

The TSP has also published booklets on these topics. You can find Loans and In-Service Withdrawals on this website. They are also available from your agency, service, or through the ThriftLine.