Q. Thank you very much for allowing us the opportunity to “ask the experts” through your forum. It can be difficult to get a correct answer at times from the Web. I am an air traffic controller with 30 years government service, and am eligible to retire now at 50 years of age. I currently have a TSP loan with a $2,900 balance outstanding. If I retired now, would I be able to withdraw my TSP account as a lump-sum payment with this outstanding loan balance? Or would I first be required to pay off the $2,900 loan before TSP would process my lump-sum request?
A. You can take the withdrawal without repaying your loan first. The loan will be declared a taxable distribution, in addition to the withdrawn amount. You will also be subject to the early withdrawal penalty rules on both amounts.