Q. I’m 56 years old with 31 years in service. I’m not ready to retire, but I would like to make a lump sum withdrawal in my TSP account for a down payment on a house. Do I have to pay it back or will the loan be treated like an ordinary income and pay regular tax?
A. Based on the facts you describe, you are not eligible to take a lump sum withdrawal from your TSP account at this time. You may take a loan, which you’ll be required to repay. If you fail to repay it completely, as scheduled, the unpaid balance will be declared a taxable distribution. The declared distribution will be treated as ordinary income for tax purposes and may be subject to an early withdrawal penalty.