Q: I will be retiring at the end of this year and I have an outstanding TSP loan. What effect will this have on my ability to withdraw funds from my TSP once I retire?
A: Having an outstanding loan will keep you from being able to make any withdrawals from your Thrift Savings Plan. The TSP will not process any withdrawals until your loan is closed.
You can close your loan by repaying it, taking a taxable distribution of the outstanding amount, or a combination of the two. It is required that the loan be closed within 90 days of the date that the TSP receives notice from your agency of the fact that you have separated from federal service.
Once the TSP is notified of your separation, they will send you a notice that contains instructions for closing your loan, including the date by which the loan must be repaid to avoid a taxable distribution. It often takes as much as 30 days from the day you separated for the TSP to notify you. If you do not repay the loan and the TSP declares a taxable distribution on the 90th day after your separation, you could have waited for four months before you could withdraw from your account.
