TSP withdrawal


Q: If an employee has a TSP loan and decides to retire prior to the loan being paid off, can the person still select a payment option out to the TSP even though there is an amount owing to the TSP? And, if the person already took a one-time withdrawal, so that is not an option, does the loan have to be paid off before a TSP payout can be made?

A: Yes, you may request a post-retirement TSP withdrawal if you have an outstanding loan. The loan will be declared part of your taxable distribution for the year.


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  1. To add some confusion, if I am 49 and active duty and decide to take a loan of $25,000 and then choose to retire before the loan is paid off. Do I have to pay the remaining balance or is that treated as taxable income for the affected year? Also, what penalties would be incurred?

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