Q. Could you tell me how a large loan against my TSP will be treated when I retire? I still owe $30,000 and am considering retiring soon. Am I penalized and taxed on those funds? If so, are there any ways around that?
A. If you don’t repay your loan within 90 days or so after you retire, the unpaid balance will be declared a taxable distribution and you will owe tax and penalty according to the usual rules. The rules are complex and you should review the information at https://www.tsp.gov/PDF/formspubs/tspbk04.pdf and https://www.tsp.gov/PDF/formspubs/tsp-536.pdf for more information.