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Rolling TRS

3,878 Views | 27 Replies | Last: 3 yr ago by dirkjones
Bert315
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Wife quit teaching and want to do something with her retirement that is not already in her 403b.

What would you do with roughly $25k that is currently in her TRS?
Grown Pear
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Easiest would be to just move it into her IRA if she has one. Depending on existing IRA balances, income/ tax bracket, and age - backdoor that into Roth
TwoMarksHand
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Do you have to pay the 10% penalty if you roll it over to an IRA?
AgOutsideAustin
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Move it to an IRA penalty free but if she ever has a chance at going back I would leave it there. Very expensive to buy back lost service years.
gvine07
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I recommend leaving it for a few years after she quit because of the buyback policies (I know they were high 10 years ago). The perfect opportunity may come up from someone she used to work with. TRS isn't just for teachers - any district or university system pays in.

If there's close to a 0% chance to ever go back to a TRS entity roll it into an IRA with your bank (or Fidelity or Vanguard if you want to get fancy).
Dr. Alister MacKenzie
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You can avoid the 10% with a COVID related event, if you are feeling a Roth.
JR2007
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Spin off question...

If a teacher retires prior to reaching retirement thresholds, is all of their TRS vested or just the portion they contributed?
Richierich2323
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JR2007 said:

Spin off question...

If a teacher retires prior to reaching retirement thresholds, is all of their TRS vested or just the portion they contributed?

You will get your contributions back plus interest. The interest is capped pretty low (I want to say 6%) and it is even lower if you leave it in and are not teaching.

You are vested for a pension after five years but have to meet the other requirements (Age + Service) which could be 80 or 90 depending on when you started. Those that are rule of 90 also cannot retire until they are at least age 65. There are pretty steep penalties if you are below the thresholds.
Bert315
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I did not think there was a penalty for pulling it out if it was immediately reinvested. The only caveat of course would be if I decided to roll it into a Roth IRA correct?
AgPT06
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Did this with my wife's TRA. Roll into traditional IRA. She taught 5 yrs, then we had kids. Even if she went back (highly unlikely) the number years needed was not reasonable. Bc she wasnt teaching it was making like 1% interest. Pulled it all out in 2013 and it's done significantly better even with recent down turn.
Bert315
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AgPT06 said:

Did this with my wife's TRA. Roll into traditional IRA. She taught 5 yrs, then we had kids. Even if she went back (highly unlikely) the number years needed was not reasonable. Bc she wasnt teaching it was making like 1% interest. Pulled it all out in 2013 and it's done significantly better even with recent down turn.


This is almost exactly where we are at. Wife taught 6 years and then quit when we started having kids. Not going to go back to teaching at this point.

Was it a pain getting them to roll it out? Have heard they are a pain to deal with sometimes.
AgPT06
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Its been 7 years since I did it, but I dont recall it being that difficult. I want to say I filled out a form, they sent me a check, and I had to deposit that check into the IRA. I dont think they would do a direct transfer to the account.
AgPT06
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Looks like you can get them to write check out to your IRA directly. https://www.trs.texas.gov/TRS%20Documents/form_6.pdf
Rasslin Cheesehead
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Don't do it....I've worked in Financial Services for years and have had over a dozen people come to me to buy back years. It's really costly.
AgPT06
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I dont think this is a fair thing to apply to every person in TRS. You need to carefully consider your situation, but don't be fearful to pull it. For the dozens who you say it was a mistake for I would argue there are thousands who it makes sense to pull it. If it was drawing more than 1% interest I would hesitate more. But 25k in even a target date fund is going to make a lot more sense than just leaving it there under fear you might need it for years later. In our situation, if my wife ever returns to work, it would be likely other career paths. She wouldn't go back to the public school system. If I kick the bucket we have life insurance, investments, and she has other interests she would pursue before teaching again. Once you reach so many years out of the system, it just doesn't make sense to have to work until your 70 to get the formula right for a pension.
Jack Pearson
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So with TRS teachers get have a dollar figure that is what 7% of their salary put into an account yearly plus they get the pension based on years of service?

What is the deal with not collecting SS from a spouse?
Richierich2323
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classof2019 said:

So with TRS teachers get have a dollar figure that is what 7% of their salary put into an account yearly plus they get the pension based on years of service?

What is the deal with not collecting SS from a spouse?

No, they just get the pension. The money that is put into TRS may be withdrawn but the final formula of your pension is based on a formula (years teaching + average of your top 3 or top 5 earning years depending on when you started). You don't get both although if you have enough years you can lower your monthly pension and get a lump sum payment the year you retire.

You can collect a portion of SS if you have enough quarters but there are laws that will minimize the amount you get by a significant amount.







30wedge
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My wife had taught for seven years, we decided to start a family, and she stayed at home until the youngest of three went to first grade and then she went back to teaching. They cut her a check and I do not recall if we rolled it over or if I added to my gun collection or bought a four wheeler or something like that, lol They were about to raise the cost of the buying back years of service. She was thinking about retirement so we ran the numbers and though the cost was not cheap it made no sense not to buy back the years.
bkag9824
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Richierich2323 said:

classof2019 said:

So with TRS teachers get have a dollar figure that is what 7% of their salary put into an account yearly plus they get the pension based on years of service?

What is the deal with not collecting SS from a spouse?

No, they just get the pension. The money that is put into TRS may be withdrawn but the final formula of your pension is based on a formula (years teaching + average of your top 3 or top 5 earning years depending on when you started). You don't get both although if you have enough years you can lower your monthly pension and get a lump sum payment the year you retire.

You can collect a portion of SS if you have enough quarters but there are laws that will minimize the amount you get by a significant amount.




How many quarters outside TRS are required to the get the full amount?
30wedge
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bkag9824 said:

Richierich2323 said:

classof2019 said:

So with TRS teachers get have a dollar figure that is what 7% of their salary put into an account yearly plus they get the pension based on years of service?

What is the deal with not collecting SS from a spouse?

No, they just get the pension. The money that is put into TRS may be withdrawn but the final formula of your pension is based on a formula (years teaching + average of your top 3 or top 5 earning years depending on when you started). You don't get both although if you have enough years you can lower your monthly pension and get a lump sum payment the year you retire.

You can collect a portion of SS if you have enough quarters but there are laws that will minimize the amount you get by a significant amount.




How many quarters outside TRS are required to the get the full amount?
That's not how it works. You qualify for social security like everyone else. But if you are in TRS (and your district did not choose to be in the social security system) there is a calculation as to how much the social security benefits are reduced due the WEP or GPO offset. But dealing with collecting on a spouses SS, then it is the GPO offset which can reduce the social security benefits to zero. I think there are calculators for the WEP offset and the GPO offset on the social security website.
aduey06
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Wife quit teaching a while back and we have left it there. She started the last or second to last year that the retirement calculation number was 80, so I have been very reluctant to do anything in case she goes back. Every day that passes io is very unlikely so we have started to look into taking the money out. Thinking maybe using as a down payment on a rental property. I have heard different things on if that can be rolled into a down payment without paying taxes but have not talked to any professionals.
Jack Pearson
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Richierich2323 said:

classof2019 said:

So with TRS teachers get have a dollar figure that is what 7% of their salary put into an account yearly plus they get the pension based on years of service?

What is the deal with not collecting SS from a spouse?

No, they just get the pension. The money that is put into TRS may be withdrawn but the final formula of your pension is based on a formula (years teaching + average of your top 3 or top 5 earning years depending on when you started). You don't get both although if you have enough years you can lower your monthly pension and get a lump sum payment the year you retire.

You can collect a portion of SS if you have enough quarters but there are laws that will minimize the amount you get by a significant amount.








So what it the purpose of showing a statement with a beginning balance, how much that was contributed, how much interest the account made and an ending balance?

Then in an other section have the pension formula? Why not just show the pension formula with the avg salary its based off of?

For example,

on my wifes statement it says she has 75K in her TRS balance......then shows her 5 year teacher salary avg then underneath that goes thru the formula to show she would get a $2,200 pension a month. I'm confused what the 75k represents?
Richierich2323
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It's what you would "withdraw" if you did not qualify for the pension and took the money out.
Jack Pearson
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Richierich2323 said:

It's what you would "withdraw" if you did not qualify for the pension and took the money out.

Interesting, isnt the minimum 5 years to qualify for pension? Seems like after 5 they would roll that off the statement then....or do you have option to pull a lump sum? She is Tier 2.

I have never paid attention to my wifes trs stuff obviously as I just counted it as a bonus to what Ive always saved and done....but figured after 16 years I better understand it better. Of course she doesnt have a clue ha.
bam02
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classof2019 said:

Richierich2323 said:

It's what you would "withdraw" if you did not qualify for the pension and took the money out.

Interesting, isnt the minimum 5 years to qualify for pension? Seems like after 5 they would roll that off the statement then....or do you have option to pull a lump sum? She is Tier 2.

I have never paid attention to my wifes trs stuff obviously as I just counted it as a bonus to what Ive always saved and done....but figured after 16 years I better understand it better. Of course she doesnt have a clue ha.


Holy smokes this is us to a T! I think my wife is also in year 16. She says she seriously wants to get out after this year. I've never looked at TRS other than calculating when she hits rule of 80. And she is even more clueless about it than me. I need to research it.
Comanche_Ag
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Also keep in mind you can combine it with other state retirement systems to reach the threshold.

Proportionate Retirement Program

Participating Retirement Systems
Richierich2323
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classof2019 said:

Richierich2323 said:

It's what you would "withdraw" if you did not qualify for the pension and took the money out.

Interesting, isnt the minimum 5 years to qualify for pension? Seems like after 5 they would roll that off the statement then....or do you have option to pull a lump sum? She is Tier 2.

I have never paid attention to my wifes trs stuff obviously as I just counted it as a bonus to what Ive always saved and done....but figured after 16 years I better understand it better. Of course she doesnt have a clue ha.
You do have the option to take a lump sum payment if you make full retirement. You can also lower your pension amount by a certain percentage and have a beneficiary.

The pension does start with a 5 year minimum but it also has an age requirement and with only making 1% interest on the money it makes sense if you are never coming back and early in your career to take it out and invest it. It pisses me off to see how little interest I am getting on my TRS money..
NawlinsAg05
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This may be a dumb question, or at least show how much I don't know about how this all works....But, does the account balance amount matter at all if you plan to keep the funds in the TRS system and pull an annuity once at retirement age? I've seen many comments about the 1% interest rate being so low that it makes sense to pull money out, but that only matters when comparing to simply pulling the money out now or pulling the money out later, right? If you plan to do an annuity, does the account balance matter at all?
dirkjones
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I can't see where that number matters since annuity based on your 5 year avg salary and years in service
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