Q. Im 56-years-old with 31 years in the service (FERS). I’m not ready to retire but would like to make a one-time lump-sum withdrawal to use for a downpayment on a house. At my age , do I have to pay back the money, or is it going to be treated like an ordinary income and I would just pay a regular income tax?
A. If you are referring to a withdrawal from your TSP account, you are not eligible to take a withdrawal at this time, given the circumstances you’ve described. You may take a loan for the house purchase but will be required to repay it through payroll deductions. If you separate from service and fail to repay any outstanding loan balance in a timely manner, the unpaid balance will be declared a taxable distribution to be included on your tax return for the year as ordinary income.