Don’t Touch this account when you decide to leave teaching!
Teacher job boards seem to be filling up left and right as more and more people are leaving the profession early, some even mid-year. As this becomes a grim reality for many of us we still need to make the right financial decisions when we leave. The biggest thing to do is DO NOT WITHDRAW YOUR PENSION CONTRIBUTIONS!
When you leave teaching you have the right to withdraw your contributions to your pension fund. Notice how I say "Your" contributions. You can only take out the amount that was deducted from your paychecks over your years of teaching. The districts contributions stay in the pension fund. This is a terrible financial move. It depends on the state on how long it takes to be "vested" in the states pension plan. Typically, after 3-5 years you are vested, meaning you get access to a pension. This is true regardless how long I teach. Let's look at my current set-up
9 years of teaching - $41,000 in TRA contributions
Lets say I walk away tomorrow. What happens to that $41k? I have the option to withdraw that amount. Reminder that I never paid taxes on that amount so I'd get hit with an income tax on that amount. To make it easy, let's say it end up being $30k. So I would have the option to have that $30k now after taxes etc. Sounds okay but isn't spectacular.
What happens if I stay vested. I let that money sit in my TRA account. I am then going to be eligible for a pension from the state. It won't be enough to live off of but it will be significant. The TRA estimate for my wage and 9 years of service, so long as I didn't withdraw until age 62 would be $678 a month... For life. After only 4 years I've already gotten that $30k back and I'll continue to get $678 a month. This is true even if you leave to take a teaching job in another state. Many teachers take advantage of this and actually receive a double pension.
Changing careers or switching jobs comes with a lot of financial stress. Make sure to save yourself some future stress by leaving your pension contributions where they are at and staying vested in your state's plan. You'll be thankful you did when you get to retirement age.
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