Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post by bogleviewer » Mon May 01, 2017 2:14 pm
My DW worked for a few years as a school teacher. She contributed around $15,000 to Arizona state retirement system. We believe that we will do a better job at investing the funds than the state, however, it is hard to put a dollar amount associated with other benefits. Any advice is greatly appreciated.
$15,000 contributed.
$12,750 would be the gross refund as per the statement.
Their website also says that they will withhold 20% for federal and 5% for state but that is 25% and the $12,750 is 15% less than the $15,000 contributed.
Post by jeffyscott » Mon May 01, 2017 4:12 pm
One thing mentioned is access to and even contributions toward health insurance, with just 5 years of service. It also mentions potential increases based on returns, so it seems the $130 may not be a fixed amount, post retirement. Just the access to a group plan, seems like a great benefit if you may retire prior to Medicare age.
Since your wife may go back to work as a school teacher, seems to me that it would be a mistake to forfeit the prior service now, unless there is a significant benefit to doing so. The account appears to earn interest if you leave it in, so why not make that decision later if it becomes clear that she will never go back?
What would an annuity that will pay $130 per month for life, beginning in 30 years, cost if purchased today?
sport Posts: 12279 Joined: Tue Feb 27, 2007 2:26 pm Location: Cleveland, OHPost by sport » Mon May 01, 2017 4:21 pm
Was there matching money contributed by the school system? If the employer matched the contributions, then there is 30K in the system for your wife's benefit. If so, would you lose the additional money if you withdraw?
whaleknives Posts: 1238 Joined: Sun Jun 24, 2012 7:19 pmPost by whaleknives » Mon May 01, 2017 5:01 pm
1. If you want to close the account, the ASRS website says this is an option: "Take a refund of your account, with applicable interest. You may withdraw your funds in cash and pay all taxes and penalties, or you may rollover your funds to another qualified retirement program . . . . . While any member who has separated from employment with an ASRS employer has the right to refund their contributions, the amount of interest and eligible employer matching that is refunded along with those contributions varies by membership date and fiscal year. (emphasis added)
Refunding Your Account and Terminating ASRS Membership
"The ASRS retirement plan is classified as a 401(a) defined benefit plan by the Internal Revenue Service (IRS)." A defined benefit plan rollover into a traditional IRA is not a taxable event, and no tax or penalty withholding is required for a trustee-to-trustee transfer, where you never handle the money.
2. The ASRS website does describe in great detail what you lose with a refund, especially if your wife ever returns to teaching in the system:
Refunding Your Account and Terminating ASRS Membership.
3. I think you need to talk to someone at the ASRS, because the "customized estimates of both your retirement benefit and refund benefit" need explaining. There's no reason not to get at least all contributions refunded, even if you don't qualify for any interest and matching funds.
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mnnice Posts: 866 Joined: Sat Aug 11, 2012 5:48 pmPost by mnnice » Mon May 01, 2017 5:41 pm
[quote="sport"]Was there matching money contributed by the school system? If the employer matched the contributions, then there is 30K in the system for your wife's benefit. If so, would you lose the additional money if you withdraw?[/quote
That is how most of them work. If Arizona works like most other states cashing out like a good way to turn $30k into $13k. It makes the bar of doing better yourself very high.
123 Posts: 10915 Joined: Fri Oct 12, 2012 3:55 pmPost by 123 » Mon May 01, 2017 5:54 pm
If your wife has enough service to be vested I would encourage you to leave the funds there. There can be a lot of benefits connected with eligibility for public pensions, including availability of health care insurance.
The closest helping hand is at the end of your own arm. Topic Author bogleviewer Posts: 354 Joined: Thu Aug 25, 2011 11:01 pmPost by bogleviewer » Tue May 02, 2017 5:17 pm
mnnice wrote:sport wrote: Was there matching money contributed by the school system? If the employer matched the contributions, then there is 30K in the system for your wife's benefit. If so, would you lose the additional money if you withdraw?
That is how most of them work. If Arizona works like most other states cashing out like a good way to turn $30k into $13k. It makes the bar of doing better yourself very high.
DW has contributed the $12,750 amount by looking back. So it looks like that difference (15%) to the $15,000 was employer contribution or growth. I would imagine it would be the growth but the number literally came to exactly 15% which is weird to me.
This isn't a case of she contributed $12,750 and there is $30,000 in there. It is there is $15,000 in there and they will refund $12,750, which is what was contributed.
The liklihood of her putting in the time to get to 5 years of employment is probably 25%. If there was some big benefit I am sure she would work for another few years to get the 5 years but fortunately we aren't in a position to require her to work to meet our retirement goals.
mnnice Posts: 866 Joined: Sat Aug 11, 2012 5:48 pmPost by mnnice » Tue May 02, 2017 6:10 pm
bogleviewer wrote: mnnice wrote:sport wrote: Was there matching money contributed by the school system? If the employer matched the contributions, then there is 30K in the system for your wife's benefit. If so, would you lose the additional money if you withdraw?
That is how most of them work. If Arizona works like most other states cashing out like a good way to turn $30k into $13k. It makes the bar of doing better yourself very high.
DW has contributed the $12,750 amount by looking back. So it looks like that difference (15%) to the $15,000 was employer contribution or growth. I would imagine it would be the growth but the number literally came to exactly 15% which is weird to me.
This isn't a case of she contributed $12,750 and there is $30,000 in there. It is there is $15,000 in there and they will refund $12,750, which is what was contributed.
The liklihood of her putting in the time to get to 5 years of employment is probably 25%. If there was some big benefit I am sure she would work for another few years to get the 5 years but fortunately we aren't in a position to require her to work to meet our retirement goals.
The plan requires mandatory equal contributions by both the employer and the employee (currently about 11%). Did she make 120k for her years of teaching or 240k?
Make sure you understand the plan before you do something irreversible