My wife is done with teaching (8 years) and I am wondering what's the best way to approach the TRS?

-keep it there at the 2% growth
-cash it but take a 30% hit BUT payoff all her remaining student loans (then use that money to max out my 401k and open/max Roth IRA
-roll it over to some other IRA (confused on those options)

Suggestions?

Also, she will he stay at home for a few years, if not indefinitely, so there doesn't look like an opportunity to rollover to an employer IRA.

Now, we do have a small business that's under her name. We plan creating a S corp or C corp soon...use that money to invest in our company and avoid penalties?

If you dont desperately need the money right now, roll to an IRA. If you do need it later, same penalties apply. No reason to leave it TRS if shes done. When it earned 5% it was easier to wait and see, now that they dropped it to 2% it's tough to justify leaving if she doesn't return very soon. Roll over is easy. They send you a check. Deposit it into IRA account within 90 (I think) days.

This is what my old roommate just did as well. 6 years paid into ERS and rolled into an IRA. He was with DPS and has no plans to go back to the gov. I think the time limit was 60 days though before the IRS starts penalizing.

Just remember that you will only get what she contributed, minus the 30% penalty. The state will keep their match.

This is why I have left my money in since I left a state job 7 years ago?

Does the penalty apply to post tax IRA's? What IRA does an unemployed homemaker qualify for?

I have no I deal about anything you just ask.

I just know what I researched for my TRS account. I looked at cashing out when I was unemployed during the last oil downturn. Cashing out my TRS account was an absolute last resort.

You have to do a direct roll over to avoid penalties and taxes:

If you do a direct roll over, TRS will make the check payable directly to your IRA or an employer plan. TRS then will mail the check to you for you to deposit it with your IRA or employer plan. You should contact the IRA sponsor or the administrator of the employer plan for information on how to do a direct rollover

https://www.trs.texas.gov/TRS%20Documents/form_6pg1.pdf

Dave Ramsey talks about this often.

Pretty sure their refund form says direct withdrawal penalty is 20% not 30%. Either way I just asked for a refund to put a big dent in student loans. I also believe you can buy back your years of service if you ever go back someone was telling me.

aggie4231 said:

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Just remember that you will only get what she contributed, minus the 30% penalty. The state will keep their match.

This is why I have left my money in since I left a state job 7 years ago?

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Yep, it's not even a match into your retirement account. They call it a match to make you feel like the State is contributing money along with you into its giant TRS pool. It's not even your money if you retire from TRS.

I have friends and family members who have taken money out of TRS and regretted it. Some are happy they did.

I recommend leaving it in for a couple years to see if she wants to get another job that pays into TRS. Life happens. If she works ever wants to work for a public college, university, or school district they all pay into TRS. It is expensive to buy your time back.

I rolled over my wife's TRS a few years ago into an IRA. $20k worth, I bought cost, aapl and nflx with it. Now it's worth a hell of a lot more.

To think I let it sit there for 4 years getting a measly few percent. Would be 6 figures by now if I had done that in '12 when we left.

Quote:

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You have to do a direct roll over to avoid penalties and taxes:

If you do a direct roll over, TRS will make the check payable directly to your IRA or an employer plan. TRS then will mail the check to you for you to deposit it with your IRA or employer plan. You should contact the IRA sponsor or the administrator of the employer plan for information on how to do a direct rollover

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This. Did this for my wife earlier this year when she called it quits after 7 years. TRS waited the maximum amount of time allowable to mail out the check, and then we sent it on to Vanguard with insurance on the mailing. Why they don't electronically transfer it after all the signatures they demand up front I will never understand.

I am confused on the IRA part. My wife will not be working for the foreseeable future, so can that TRS check be sent to my employer 401k (if they allow it). If yes, the amount she has is more than the yearly contribution max.

If it's into a Roth IRA, the max is what $5500.

1. Is the max moot when it comes to rolling over?
2. Can it be moved to my IRA?

newhowdyag2004 said:

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I am confused on the IRA part. My wife will not be working for the foreseeable future, so can that TRS check be sent to my employer 401k (if they allow it). If yes, the amount she has is more than the yearly contribution max.

If it's into a Roth IRA, the max is what $5500.

1. Is the max moot when it comes to rolling over?
2. Can it be moved to my IRA?

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$5500 is contribution max; has nothing to do with a rollover. A rollover is moving retirement funds from one retirement account to another, so it isn't considered a contribution for that year.

Also, IRA is 'individual' retirement account. Has no requirements of employment. In your initial post you mentioned she wont' have an employer IRA; there is no such thing. An IRA is set up by an individual.

You're right, I meant an employer sponsored IRA (401k).

So that looks like the best choice. Open a Roth for her (us?) and move it over.

If you roll over to a Roth, you will pay the taxes but not the penalty is my guess.
I would not be surprised if you have to roll it directly into a standard IRA and then again into the Roth.

Not sure.

Rollover IRA

Can anyone speak at a high level the healthcare benefits that TRS carries?

My wife left A&M about two years ago and we've so far kept her TRS, but I've been thinking about rolling it over to a IRA since who what healthcare is going to in 25+ years.

TRS is a direct benefit pension rather than direct contribution plan, so to me TRS interest rate or accrued interest is not relevant. So, let's take a deeper dive at this scenerio:

8 years times 2.3 TRS multiplier times three years average salary of $50,000=

So, that's a gross payment of $750/month for the rest of her life at retirement. Let's say she falls under rule of 80, so she could be eligible at age 72.

Now, let's look at what she has contributed. My best guess is $30,000. Take that figure and multiply by a generous 7% for the next 30 years and that comes to $100,000.

At age 72 and she lives at least 20 years that would come to
roughly $200,000 over lifespan...could be even more if she lives longer.

So, TRS would be the better option in my opinion.

Archie86 said:

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Now, let's look at what she has contributed. My best guess is $30,000. Take that figure and multiply by a generous 7% for the next 30 years and that comes to $100,000.

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$30k with 7% return over 30 years should end up closer to $240k.

Rule of 72: 72/7 ~10, so money should double every 10 years. Over 30 years:
$30k -> $60k -> $120k -> $240k

What would you do, BQ?

7% Rate of return is very generous and I would recommend money stay in TRS, unless family has unique financial situation.

aggiebq03+ said:

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Archie86 said:

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Now, let's look at what she has contributed. My best guess is $30,000. Take that figure and multiply by a generous 7% for the next 30 years and that comes to $100,000.

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$30k with 7% return over 30 years should end up closer to $240k.

Rule of 72: 72/7 ~10, so money should double every 10 years. Over 30 years:
$30k -> $60k -> $120k -> $240k

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thats assuming she has the $30k up front in year 1.

In reality, the contributions are spread out over the 8 years.

Does trs vest anything at 10 years of service. That's only 2 more years she might want to do later verse starting over if you pull it.

You can rollover to a traditional ira with no tax implications as I understand it. Does not have to be employer sponsored. No limit on amount. If trs only pays 2% then that'd Be the ticket imo.


Is there some issue wrt vesting that impacts the lump sum?

If not the incremental gains over 35+ yrs of market return v. 2% will make it an easy decision. 2% is terrible. Doesn't even keep pace with inflation

What are the odds she evers goes back at some point - any employer that pays into a state pension? TRS time can buy into various other public retirements plans.

Based on current TRS rules get 2 more years (total of 10) and you would be eligible for health care in retirement to supplement Medicare. Inlaws have been retired for almost 15 years and have had several serious medical bills ( I would estimate they are approaching $1 million) and never pay a dime.

Obviously you can't predict the future but just a couple thoughts.