If you are thinking about switching careers, moving out of state, or taking a break from education, it may sound tempting to withdraw your funds and receive a lump-sum payment of your contributions and interest. However, that decision may come back to haunt you when you’re ready to enjoy those golden years in retirement.
Please consider the following before you make that irrevocable decision.
Leave the funds with TRS
If vested, you are eligible for a lifetime, monthly benefit starting at age 60.
Account remains active for 4 years and interest is accrued on contributions.
After 4 years, the account becomes inactive and no interest is earned.
May come back to work with a TRS-covered employer and earn additional service credit.
Primary beneficiary eligible to receive monthly benefit upon your death if account is active.
Eligible for disability retirement.
Example
17 years of service x 2% x $5,761
(final average salary) = $1,959
Member will receive $1,959 per month at age 60 for the rest of their life.
Benefit increases with Cost of Living Adjustment (COLA), if eligible.
Withdraw TRS funds
If vested, you forfeit a lifetime, monthly benefit.
May receive lump-sum payment of only your contributions and interest, which is subject to taxes. You do not receive any employer contributions.
May do a direct rollover of funds to a qualified retirement plan and defer taxes.
If you return to a TRS-covered employer and earn at least 3 years of creditable service, you may purchase your withdrawn service.
Example
Receive a one-time lump-sum payment of $63,990, before taxes.
No lifetime monthly benefit. Relinquish over $597,000 in benefits (assumes 25 years of benefits, COLA not included).
Would have to purchase withdrawn service if returned to work for TRS covered employer.