Should I take out a HELOC or a TSP loan to finance my $40,000 bathroom renovation?

[Anonymous]

I'd do the tsp loan and pay it back as fast as possible. I've done it twice and still have $1m in my fund.

[Anonymous]

The tax on the TSP interest ($2K of interest per year) is not important.

OP's desire to hold on to $250K in index funds to jump on an imagined "opportunity" that arises is the yellow flag in their financial planning.

[Anonymous]

Anonymous wrote:The tax on the TSP interest ($2K of interest per year) is not important.

OP's desire to hold on to $250K in index funds to jump on an imagined "opportunity" that arises is the yellow flag in their financial planning.

I mentioned the tax for the other poster who is taking out loans to get more into their 401(k), which doesn't really make sense.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the bathroom currently functional? I would save money over the next few years and then pay cash.

At this point, the useful life of the bathroom is over. It is > 50 years old and has never been updated. I would like to do this project now and not wait to save the cash.

If the toilet , shower and sink work, and there are no leaks, it hasn't outlived "its useful life." What a ridiculous way to characterize your desire for a renovation.

You described taking the TSP loan out as a "no brainer." I agree, in the sense that anyone who takes out a TSP loan out for an unneeded home renovation 5 years before retirement doesn't have the sense the good Lord gave a turnip.

You seem needlessly triggered. The OP has a healthy TSP and will have a pension in retirement, in addition to SS.

I probably am. Stupidity annoys me. I should probably stick to Bogleheads, and stay away from this forum.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the bathroom currently functional? I would save money over the next few years and then pay cash.

At this point, the useful life of the bathroom is over. It is > 50 years old and has never been updated. I would like to do this project now and not wait to save the cash.

If the toilet , shower and sink work, and there are no leaks, it hasn't outlived "its useful life." What a ridiculous way to characterize your desire for a renovation.

You described taking the TSP loan out as a "no brainer." I agree, in the sense that anyone who takes out a TSP loan out for an unneeded home renovation 5 years before retirement doesn't have the sense the good Lord gave a turnip.

Yes, save for a year and gather as much cash as you can. If something is functional, I wouldn't take a loan to renovate.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Is the bathroom currently functional? I would save money over the next few years and then pay cash.

At this point, the useful life of the bathroom is over. It is > 50 years old and has never been updated. I would like to do this project now and not wait to save the cash.

You should be able to make solid updates for $5k a piece. Call your realtor for a good recommendation.

[Anonymous]

Anonymous wrote:The tax on the TSP interest ($2K of interest per year) is not important.

OP's desire to hold on to $250K in index funds to jump on an imagined "opportunity" that arises is the yellow flag in their financial planning.

I’m the PP who said pay attention to the tax.

As you write, it’s $2k per year in interest. I’m in the 35% tax bracket for federal. Add 5.75% for VA state, 1.45.% for Medicare, and 0.9% for the high earner Medicare tax. So, let’s call it 43%. Due to that tax rate, it takes me $3.5k of earnings to pay the $2k in after tax interest for a year.

Let’s say my taxes are identical in retirement. That $2k in interest (that’s now a 401k contribution) is only $1140 after I pay income taxes. So I’ve lost almost $2400 per year to taxes on a $50k loan. That’s about 4.8% paid to the government, on top of the missed returns from the money being missing from the account.

[Anonymous]

My completely updated half bathroom including flooring with a new fan in it cost me $3500. I don't understand why this bathroom is so expensive. This was 3 years ago.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the bathroom currently functional? I would save money over the next few years and then pay cash.

At this point, the useful life of the bathroom is over. It is > 50 years old and has never been updated. I would like to do this project now and not wait to save the cash.

Does the toilet flush? That seems useful.

PP, we are getting a new bathroom. You are not going to talk us out of it. The question is how we finance the expense.

Ignore the rude pps. Do it now so you can enjoy it.

Agree. Enjoy it! We are doing our basement. About same age as you. We are doing HELOC loan. Maybe I should rethink that and do TSP! Good luck and enjoy.

[Anonymous]

Anonymous wrote:TSP loan is quick and easy. We used it to supplement a down payment and are 3.5 years into paying it off. No regrets.

+1 Same here. We paid for a period of years then paid off the remainder early. Worked out great!

[Anonymous]

Anonymous wrote:My completely updated half bathroom including flooring with a new fan in it cost me $3500. I don't understand why this bathroom is so expensive. This was 3 years ago.

I've never heard of a price this low. You must have had incredibly cheap materials and labor.

[Anonymous]

Save up cash for it for two years, whatever you would pay for two years if you took out a loan.

Meanwhile make sure your renovation will be handicapped accessible. At your age (my age) I can't tell you how many people are starting to need accessible bathrooms. If you are spending $40,000 make SURE you will be able to use it if your mobility declines.

[Anonymous]

Anonymous wrote:My completely updated half bathroom including flooring with a new fan in it cost me $3500. I don't understand why this bathroom is so expensive. This was 3 years ago.

You will not find a decent+ contractor to do the work for even $3500, let alone the supplies.
Renovating is costly, unless you do the work yourself

[Anonymous]

Since you’ve got $250k in cash I’d use that. Then you get the full uptick in TSP, including the tax free compounding. You aren’t likely to miss an “opportunity” better than that.

Alternately take a small ($10-15k) HELOC and pay it back in a year. Then the interest cost will be lower. Use your cash for the rest.

[Anonymous]

You are getting ripped off, OP.