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Hey @Juanec! I'll admit that I'm not too familiar with the TSP rules, but since, as you say, they're pretty similar to 401(k)s, I'm going to answer this the same way I would had you asked the same question about a 401(k).

Since you're 74, you don't have to worry about any penalties. What I would be concerned about is the tax bill, assuming that this was a traditional tax-deferred account. In that case, your distribution will be taxed as ordinary income, which can mean you get a huge tax bill, even if you don't really have much income. So let's say you normally have $35,000 in taxable income between your Social Security and your regular TSP distributions. But then you take a $100K distribution and use it to pay off your mortgage. In the eyes of the IRS, your taxable income for the year was $135K. Yikes!

Maybe that's worth it for you so that you don't have that mortgage payment, but it's definitely something to consider. The other disadvantage, of course, is that the money isn't growing or compounding, so there will be less there for future withdrawals.

If anyone else here has any thoughts about the pros and cons (or if you know more about TSPs than I do), please weigh in!

Good luck and have a wonderful holiday!

Dear Penny and @Juanec!,  Penny has it correct. Taxes are going to be your biggest problem.  What you might consider doing is using your monthly withdrawals from TSP to pay your monthly mortgage.  For example, let's say you are currently receiving $1,500 a month from TSP to support your Required Minimum Distributions.  But you now want to pay off your $1,200 monthly mortgage using TSP.  You could consider asking TSP to increase your monthly pay by $1,200 now receiving $2,700 monthly from TSP.  That would only increase your annual income by $14,400 vice the $100,000 in Penny's example.  This leaves $85,600 still invested and growing and if you are currently itemizing on your taxes, then it will help your current tax situation.

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