In shutdown scenario, do's and don'ts of TSP

Friday - 2/25/2011, 11:56am EST

Arthur Stein, Certified Financial Planner, SPC Financial

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By John Buckner
Federal News Radio

A Thrift Savings Plan loan could help financially float workers during a potential furlough, but it may already be too late to get one.

"Even if these were normal times and you asked for a loan, I mean, I think it would probably take weeks and weeks for them to process at normal times. So it's not a very liquid source of money," said Arthur Stein, Certified Financial Planner with SPC Financial, Inc. If government shuts down, all TSP loans that would be processing would sit idle until operations resume.

Stein said this does not leave feds with many options. He strongly suggested setting up an emergency fund and having a home equity line of credit. As a fallback, Stein said running up credit debt could be a last resort.

"My recommendation is then, well, reduce your contribution [to TSP] down to 5 percent, build up your emergency fund and then resume your maximum contribution to the TSP," said Stein.

This way, feds can be ready for any type of situation that would require time off work.

Earlier this week, Tom Trabucco, director of external affairs at the Federal Retirement Thrift Investment Board, told the DorobekInsider that timing is everything when taking money out of your TSP.

Employees who have already finalized their TSP loan should remember that loan payments can be suspended while in non pay status.

John Buckner is an intern with Federal News Radio.

(Copyright 2011 by FederalNewsRadio.com. All Rights Reserved.)

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