Rollover Teacher Pension?

[Legally_dead]

My wife taught for eight years and is now a SAHM. She has no plans to go back to teaching. She is eligible to draw on her teacher pension on 12/31/2038. At that time, she would receive $389.73 per month (with an estimated payout of $133,755.33 over the remainder of her life.)

Or we can roll over $31,086.07 now if she waives her right to the pension and other teacher retirement benefits.

Any thoughts on whether we should leave the money where it is or roll it over?


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[bingybear]

My wife taught for eight years and is now a SAHM. She has no plans to go back to teaching. She is eligible to draw on her teacher pension on 12/31/2038. At that time, she would receive $389.73 per month (with an estimated payout of $133,755.33 over the remainder of her life.)

Or we can roll over $31,086.07 now if she waives her right to the pension and other teacher retirement benefits.

Any thoughts on whether we should leave the money where it is or roll it over?

what are the other benefits?

 

[rodi]

A couple of questions.
Is the pension COLA'd? Or is it a fixed pension.
Have you plugged in the $31k lump sum into a SPIA quote calculator to see how much pension that money could buy on the open market.

Also - some retirement planning talks of a 3 legged stool. SS is one leg, Pension is another leg, and savings are the 3rd leg.... It's good to have all 3 legs - even if one is shorter (like mine is - I have a very small pension starting later this year.) Diversity in income streams is a good thing.

 

[Teacher Terry]

I would leave it because if you died or became disabled tomorrow she might go back. Also in many states the teachers and any other public worker (city, county, state) are all in the same pension plan. So if she went to work for one of them she would be building her pension. As someone else mentioned a 3 legged stool is good.

 

[ohyes]

Hi Legally,

Really, I know nothing except that my mom taught 11 years (60's and 70's), got out of teaching and took the payout as soon as she could. More than a few times, she has mentioned wishing that she had not done that.

 

[lemming]

So would it make a difference in her getting 1/2 spouse SS if she cashes out a teacher pension rather then draw on it at SS age? Or would it be treated the same? WEP is confusing.
( I thought this thread was about the 4yr old logic-how to put an elephant in the refrigerator.)

 

[Winemaker]

DW taught school for 5 years before she retired to be a SAHM. I took her contributions and theirs, and rolled it into DW's IRA. Year 6 we moved to another state, and DW got bored cause the kiddos were in school then and started subbing. She re-certified herself in the new state and taught for another 20 years. 2 years before she FIRED, she was able to go back and repurchase her time, bringing her grand total to 27.

I suggest you roll her pension into a tIRA but it would depend on the "other benefits". The rollover would be a nontaxable event and if invested in similar investments you could expect the same future value.

We still have to purchase HC insurance, my employer dropped coverage for retirees, and DW needed 30 years in same school district to get subsidized HCI. OUCH!

 

[Texas Proud]

I agree that other benefits matter....


However, with as little time as your DW has they probably are not that much...

I have a sister who taught 40 years and gets really cheap medical insurance... this is secondary to Medicare... but pays 80% of her 20%... so in the end she only pays 4%... saved her big bucks when she was hospitalized for a year...

 

[akck]

So would it make a difference in her getting 1/2 spouse SS if she cashes out a teacher pension rather then draw on it at SS age? Or would it be treated the same? WEP is confusing.
( I thought this thread was about the 4yr old logic-how to put an elephant in the refrigerator.)

What you're thinking about is GPO and it doesn't make a difference whether you take a lump sum now or pension later. They will make an estimate on the lump sum and reduce the spousal SS by 2/3 of the estimate.

 

[Koolau]

For many years, pensions tended to pay out better than individual annuities although, I'm sure that was not universal. In any case, in addition to finding out what you could get on your own, annuity wise, I think you need to decide if you feel comfortable managing this lump sum yourselves. Not everyone is good at investing a chunk of money. You have to know yourselves to make that decision. Good luck.

 

[pb4uski]

I would roll it into an IRA even though the $390/month is attractive based on today's annuity pricing.

If you took the $31,086 and bought an annuity that began in 2038 (in 22 years) for a currently 4 yo female living in Texas the monthly payout would be $293... so the $390 looks pretty good.

However, if you roll it over and invest it in a target retirement fund that returns 6% annually for the next 22 years, at the end of 22 years you would have $112,019 which at today's annuity rates would buy a SPIA that would pay $591/month.

All of the above assume that the payout is fixed... if it is COLAed then it is a whole different analysis and probably would favor keeping it in the plan and not rolling into an IRA.

 

[Big_Hitter]

would the $390 get colas to 2038? that's a game changer

 

[pb4uski]

No, I think the question was if the 390 gets colas starting in 2038 when benefits begin.

 

[Big_Hitter]

No, I think the question was if the 390 gets colas starting in 2038 when benefits begin.

sometimes terminated vested members get interim COLAs

 

[DrRoy]

Some retirement planning talks of a 3 legged stool. SS is one leg, Pension is another leg, and savings are the 3rd leg.... It's good to have all 3 legs - even if one is shorter. Diversity in income streams is a good thing.

I like this concept also. I would keep the pension.