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

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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Is the bathroom currently functional? I would save money over the next few years and then pay cash. [/quote]

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.[/quote]

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.  [/quote]

OP here: some of us don't enjoy living in a dump.  I'd like to live in a spruced up house now.  I can afford it, and could pay cash if I wanted.  But I don't want to - I'd rather have my cash invested and liquid if a good opportunity comes along. So thanks for the lecture, but do you have any insight into whether I should take out a TSP loan or a HELOC?[/quote]

I'm curious what "good opportunity" you are waiting for. I truly don't understand why you would take out a TSP loan or HELOC if you already have the funds. If you're absolutely determined to do it anyway I would say the TSP loan is better.   [/quote]

PP, you either have an unlimited amount of liquid funds, or no financial savvy.  For those of us who have a good amount but not unlimited - say, $250,000 in liquit funds - there are ample reasons not to liquidate those funds instead of taking out a loan.  Maybe they don't want to pay capitol gains taxes by cashing out a mutual fund.  If PP can get a TSP loan at 4.5%, they would be better off doing that and leaving their cash in an S&P index fund.   Maybe they want to use that cash to buy a vacation home, or another luxury.  Maybe interest rates will go even higher, in which case the returns on cash get even better.  Plenty of reasons not to pay cash.[/quote]

DP, but I don't get this because aren't they taking the TSP money out of an index fund (if that's where it's invested)? Why is that better than taking it out of an after tax brokerage S&P fund? Other than maybe the tax timing? But either way, they're giving up growth in an index fund to spend $40k. Or else they're changing their asset allocation if they have the TSP in bonds.[/quote]

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