Q: There is a possibility that I may have to accept the early out with the U.S. Postal Service. If I do, can I make a loan from my Thrift Savings Plan before I retire? Will I be able to continue to pay it back monthly even though I am retired from the USPS? Or will I have to pay the complete amount back before I retire? Are there any penalties for this? Do I have the choice of not paying it back, and if I choose not to, will I be charged penalties as if I withdrew that amount?
A: You may take a loan from your TSP account before you retire, but you must pay it back when you separate from service or it will subsequently be declared a taxable distribution. This distribution will be treated like any other distribution for the year in which it is declared — subject to taxation and the early distribution penalty, if applicable, if not rolled over.
— Mike Miles