Quote:
Originally Posted by lae60
If a federal employee has a TSP loan balance when one retires, and does not want to repay the loan balance, can that be considered a withdrawal without the pre-retirement tax penalties / early withdrawal tax penalties?
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Yes, provided you are retiring in the year you turn 55 or later.
Quote:
Originally Posted by lae60
I know that once retired I could just pay off the loan, within 90 days, but what are the options if one does not want to pay it off, other than taking the tax hit?
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In addition to either paying it off or taking a taxable distribution for the entire outstanding balance, you also have the option to partially repay the loan and receive a taxable distribution of the remaining outstanding balance.
Quote:
Originally Posted by lae60
Also, does not paying off the loan affect the withdrawal options of the TSP account?
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TSP will not process a withdrawal application until such time as your loan account is closed by means of one of the options discussed above. Once the loan account is closed, you will then have all withdrawal options available to you.