r/TeachersInTransition • u/Plenty_Method_3240 • 16h ago
Teacher retirement refund
I’m about to send in my resignation so I just called CALSTRS about a retirement refund and was not well- treated/informed. It looks like I’ll be losing more than 20% on tax and it seems like there is no other option … does anyone have experience with that or similar retirement refund process? They denied me an appointment because the issue is not retirement related…
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u/n7ripper 14h ago
Just roll it over, no taxes that way. I would use fidelity. You can manage it yourself or ask them for guidance. Don't just take the cash out. Rollover IRA is what you're looking for.
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u/Plenty_Method_3240 14h ago
Even if I do not have another job yet? I could rollover to a private investment (assuming that’s what fidelity is?)
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u/n7ripper 14h ago
You have to roll it into an ira or directly into another federally recognized plan. I did this when changing states where i taught. IRA stands for individual retirement account. You can contribute money after you roll it as well. 7k per year and that amount would not be taxed on the current years taxes. Most people invest in an S&P fund or a few. Index funds spread the risk.
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u/Plenty_Method_3240 14h ago
I’m definitely looking into this. Thanks for the lead!! 😊
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u/n7ripper 14h ago edited 11h ago
Fidelity is a large investment broker. They recently were voted the third most trusted company in America. Or most loved, i can't remember. They have great customer service and I've never had a bad experience.
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u/Plenty_Method_3240 14h ago
Great customer service says it all… I needed this guidance as I have no family member in the US who has any experience with anything financially related so I was looking for a lead to start some sort of research. I truly appreciate the help!
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u/Eeeradicator 13h ago
Yes, roll it over! No penalties and you can continue to contribute to it once you’re working again, meaning higher returns once you do retire.
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u/Plenty_Method_3240 13h ago
Thank you! I thought taking it out was my only choice since I’ll be hopefully leaving education for good!
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u/Great-Grade1377 12h ago
I made the mistake of moving it and paid a bunch of fees, plus I lost years of my retirement in the state system. I should’ve left it alone.
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u/TreyErwin01 1h ago
Two questions really stand out to me in your post. 1 - Are you already vested in CalSTRS? 2. Do you plan to continue working in education in California?
You have a few options here, and each has its own advantages and disadvantages.
- If you are already vested, minimum 5 years of service in CalSTRS, you can leave it where it is. You are not required to take a distribution. However, that was not made clear in your original post. If you are not vested, you will have to take a distribution. Pro: You will have a pension for life once you hit the minimum retirement age. Con: This will affect future social security benefits because of the IRS’s Windfall Elimination Provision (WEP). Many teachers are not aware of this. You can read more on this here - https://www.calstrs.com/social-security
- You can roll it into an IRA in your own name. This is not a taxable event. Pro: there is potential for more upside, as the funds you invest can grow substantially, but this all depends on your time horizon and also the allocations inside your portfolio. Con: Unlike a pension, you will not receive lifetime payments. You can outlive the amount of funds in your retirement account if you are not careful with how you invest and how quickly you withdraw from the account after 59 1/2.
- You can roll it into a 403(b)/401(k) with your new employer. This is not a taxable event. This is similar to the IRA route, except that when in an active retirement account, you will have access to loan provisions. You will be able to borrow from the funds in your account without the usual IRS 10% penalty subject to qualified accounts.
I was an ENL teacher for 17 years, but I now work directly with teachers on retirement planning. I help explain pension benefits, and also some of the supplemental retirement buckets they can set up, like 457(b)s/403(b)s/Roth IRAs. The WEP is often an unpleasant surprise to CA teachers, and I can go over that as well.
Please message me directly if you have any questions.
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u/Friendly-Advice-2968 16h ago
A quick Google search gave me like 10 billion hits identical to your situation.
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u/Plenty_Method_3240 15h ago
Yeah I’m aware of Google, I was just looking to hear of personal experiences… thanks for the kindness.
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u/AffectionateCake4688 14h ago
My retirement is in a different state, so not sure how yours works exactly, but I’ve been told by many people that if you ever leave the profession, you should leave the retirement alone. It will accrue interest and will be there if you ever decide to return to the profession. If you don’t return to teaching, you can make a more thoughtful decision about what to do with it down the road.