Anyone here retired civil service?

[Wolf359]

Originally Posted By: Schmoe
If you got a few years left, take out a TSP loan, at 2%-ish, pay off your house/remodel, and pay yourself back, then retire, and then take small withdrawals. There is a age whereas TSP requires you to take out money, don't know exactly what that age is. I took out about 20K to remodel the kitchen, paid myself back in two years at a 2% interest rate. You can repay it back at any amount you want.


While that makes sense on the surface, most people advise against it. The advantage of tax deferred savings is that you can invest the money and get a higher return not subject to taxes. S&P 500 has average about a 7.5% return over the last 10 years and that includes the down years. Over the last 5 years, it's more like 14% and just year to date is about 13%. That's why I wouldn't be that big a rush to cash out of a fund that can grow at a higher rate than the interest you're probably paying on your mortgage. If I needed 20k, I'd just do one of those credit card cash advance checks, usually just 2-3% advance fee and 0 interest for 12-18 months.

 

[ArrestMeRedZ]

Originally Posted By: LoneRanger
What's a TSP? Is it a federal employee's version of 457b deferred compensation plan?


I am not familiar with 457b but a TSP is very close to a 4O1k for fed employees with some annuity provisions added. An earlier post has a good link.

 

[grampi]

Originally Posted By: Schmoe
If you got a few years left, take out a TSP loan, at 2%-ish, pay off your house/remodel, and pay yourself back, then retire, and then take small withdrawals. There is a age whereas TSP requires you to take out money, don't know exactly what that age is. I took out about 20K to remodel the kitchen, paid myself back in two years at a 2% interest rate. You can repay it back at any amount you want.


There's no way I'm going to pay off a $100K+ mortgage with a loan from my TSP, and then pay it back in 2 years and 8 months...

 

[grampi]

Originally Posted By: Mr Nice
OP will be very comfortable will all his streams of retirement income(s).



I don't know about being VERY comfortable, but I should be alright. BTW, how do you know?

 

[wtd]

Originally Posted By: grampi
Originally Posted By: Schmoe
If you got a few years left, take out a TSP loan, at 2%-ish, pay off your house/remodel, and pay yourself back, then retire, and then take small withdrawals. There is a age whereas TSP requires you to take out money, don't know exactly what that age is. I took out about 20K to remodel the kitchen, paid myself back in two years at a 2% interest rate. You can repay it back at any amount you want.


There's no way I'm going to pay off a $100K+ mortgage with a loan from my TSP, and then pay it back in 2 years and 8 months...


How many years left do you have on your mortgage? If you take that $100+ out as a lump sum to pay off your house, your income for that year will be that amount plus what you have made up to the point of retirement plus the annuity amount you receive. Your taxable amount could then be pretty substantial depending on what your pre-retirement income is. The only way to lessen that is to take out monthly payments. Your post retirement annuity should be less than what you were making before retirement and the added monthly TSP amount should still keep your tax obligation down over taking a big lump sum.

 

[eljefino]

Are you able to return to a similar job with the gov't as a contractor? It's big around me. Get your pension and get a salary on top, I think they call it "double dipping."

Hammer down your mortgage while you're still healthy.

 

[Wolf359]

Originally Posted By: wtd
Originally Posted By: grampi
Originally Posted By: Schmoe
If you got a few years left, take out a TSP loan, at 2%-ish, pay off your house/remodel, and pay yourself back, then retire, and then take small withdrawals. There is a age whereas TSP requires you to take out money, don't know exactly what that age is. I took out about 20K to remodel the kitchen, paid myself back in two years at a 2% interest rate. You can repay it back at any amount you want.


There's no way I'm going to pay off a $100K+ mortgage with a loan from my TSP, and then pay it back in 2 years and 8 months...


How many years left do you have on your mortgage? If you take that $100+ out as a lump sum to pay off your house, your income for that year will be that amount plus what you have made up to the point of retirement plus the annuity amount you receive. Your taxable amount could then be pretty substantial depending on what your pre-retirement income is. The only way to lessen that is to take out monthly payments. Your post retirement annuity should be less than what you were making before retirement and the added monthly TSP amount should still keep your tax obligation down over taking a big lump sum.


Which is why it makes no financial sense. All he has to do is set it up so that the monthly mortgage payment is taken out automatically from his account. That you can just set up with the administrator of the account. Then the balance of the 100k grows tax deferred and the net income will be higher than if he took it out in a lump sum. Kinda like arbitrage, average 7-14% pre-tax (no tax) return and pay a 4% interest, you pocket the 3-11% difference. Actually a little more because you get to deduct the 4% interest.

 

[Mr Nice]

All the retired military folks I know are very comfortable. Especially since they had a second career after the military.

My wife is a retired Air Force major, plus she has civilian pensions (company & voluntary).

 

[grampi]

Originally Posted By: wtd
Originally Posted By: grampi
Originally Posted By: Schmoe
If you got a few years left, take out a TSP loan, at 2%-ish, pay off your house/remodel, and pay yourself back, then retire, and then take small withdrawals. There is a age whereas TSP requires you to take out money, don't know exactly what that age is. I took out about 20K to remodel the kitchen, paid myself back in two years at a 2% interest rate. You can repay it back at any amount you want.


There's no way I'm going to pay off a $100K+ mortgage with a loan from my TSP, and then pay it back in 2 years and 8 months...


How many years left do you have on your mortgage? If you take that $100+ out as a lump sum to pay off your house, your income for that year will be that amount plus what you have made up to the point of retirement plus the annuity amount you receive. Your taxable amount could then be pretty substantial depending on what your pre-retirement income is. The only way to lessen that is to take out monthly payments. Your post retirement annuity should be less than what you were making before retirement and the added monthly TSP amount should still keep your tax obligation down over taking a big lump sum.


I refinanced our mortgage in 2011 for 30 years, so we have roughly 24 years left on the mortgage. I now realize that pulling what owe on the mortgage out of my TSP to pay off the mortgage isn't the way to go. Too much tax liability that way. I'm making an appointment with a financial adviser to find out the best way to go...

 

[Schmoe]

...with that much to still pay, yeah, that wouldn't make sense....you'd be basically paying around 1500 per pay period to repay that back. I was thinking if you owed somewhere around 50K or below. Reading above about putting that potential money into the SP fund and it's "averaging" 7.5% and all that from posters above.....just remember 2008...it took me a good 5 years to make up that 80K I lost. I'd be willing to bet you, like me, have a lot of your TSP in the G fund since you're looking down the barrel of retirement. I'm looking at retirement within 8-10 years and I just simply can't afford to take high risk and then also having to go through all that stress again. Screw that.

 

[Shannow]

30 year mortgage at 54/55 ?

Did the financial institution honestly reckon that you were going to work to mid '80s ?

edit, when we got the finance for our new place, in order to go past 60, I had to prove that I had retirement savings that would cover it (not necessarily eat, LOL)....crazy, at 49 they were prepared to lend me $800k...I couldn't believe it.

 

[Wolf359]

Originally Posted By: Shannow
30 year mortgage at 54/55 ?

Did the financial institution honestly reckon that you were going to work to mid '80s ?

edit, when we got the finance for our new place, in order to go past 60, I had to prove that I had retirement savings that would cover it (not necessarily eat, LOL)....crazy, at 49 they were prepared to lend me $800k...I couldn't believe it.


I thought that was a little weird til I realized you were in a different country. We have no age discrimination in this country. So you could be 80 years old and they'll give you a 30 year mortgage expecting you to finish paying it off when you're 110. The only trick is that by the time you're 80, you're probably retired and don't have the income to support the mortgage. But I suppose you could be working at 70, get a mortgage and then retire the next year. As long as you're making payments, they don't really care.

 

[oilpsi2high]

Accountant here. Looks like you're not accepting private messages.

In short, you want to be debt free when you start retirement. How you can accomplish that while paying as little in tax from your pre-tax account is the other question, along with what kind of other income you may have lying around.

 

[Shannow]

Funny, I didn't consider it "discrimination" per se, but a probabilistic review of whether you had the capacity to service a loan of size x over duration y...

 

[Nick1994]

Originally Posted By: Shannow
Originally Posted By: WolI
thought that was a little weird til I realized you were in a different country. We have no age discrimination in this country.


Funny, I didn't consider it "discrimination" per se, but a probabilistic review of whether you had the capacity to service a loan of size x over duration y...
My great uncle lives in The Netherlands for 7 months of the year and just bought a condo at 70 with a 30 year mortgage. He laughed telling me about it.

 

[Wolf359]

Originally Posted By: Shannow

They don't seem to consider that a factor. Look at Warren Buffet, he's 87 and he's still working.

 

[Mr Nice]

Some older folks don't mind having a mortgage during their retirement years.

They can build wealth (in their IRA, TSP, 401K, etc) and still pay bills / taxes.
If they die, the kids can either sell the house or simply pay it off and use the property as a rental.

Very common for people here in the USA to retire and still have a mortgage.

 

[grampi]

Originally Posted By: oilpsi2high
Accountant here. Looks like you're not accepting private messages.

In short, you want to be debt free when you start retirement. How you can accomplish that while paying as little in tax from your pre-tax account is the other question, along with what kind of other income you may have lying around.



I looked at my message in box, I didn't see an option where I could either accept or not accept incoming messages, so not quite sure what you're talking about there. I know being debt free going into retirement is best, hence me wanting to pay off my mortgage, however, it's looking like paying it off all in one lump sum is going be too much of a tax burden. I am in the process of setting up an appointment with a financial planner to discuss my options...