What happens to your teacher retirement if you leave education?

This week I was able to meet with one of my closest friends, collaborating over a fun new project for her. She mentioned how she’d recently looked at her retirement numbers and made some decisions. As midlife educators, there always seems to be a looming countdown of years until we are eligible to draw from our teacher retirement fund. We don’t talk about our professions in terms of accomplishments by this point in our lives. Instead we refer to the number of years of service, or school years, until we can hang it up and get satisfactory payouts from that teacher retirement fund. It doesn’t make us bad people. It usually just means we are ready to close that chapter in the book of our lives. 

Deciding when to retire as an educator is a simple math problem to be solved. There is a magic number to hit and any educator that gets close to 20+ years of service should start paying attention to how close they are to reaching their magic number. It is not exactly the same for everyone, depending on how much you plan to be paid out. My teaching years are all in Texas. According to the Texas Classroom Teachers Association, or TCTA, use the following formula to calculate your teacher retirement benefits:

1. Multiply your years of service credit (i.e. years worked) by 2.3%. (Example: if you have 30 years of service credit in TRS, 30 x 2.3 = 69%.)
2. Determine the average of your five highest years of salary.
3. Multiply your average salary (from step 2) by the number from step 1. This is your annual TRS standard annuity. (Example: $60,000 x 69%. This person’s standard annuity would be $41,400 per year.)

An individual who, as a TRS member on Aug. 31, 2005, was at least 50 years old, or met the Rule of 70, or had at least 25 years of service credit should use the three highest years of salary for this calculation. As a disclaimer, a conversation with a TRS representative is advised to calculate your eligibility accurately. 

Generally, a TRS member may retire with the standard benefit at:

1. age 65 with five or more years of service credit; or
2. with at least five years of service, any combination of age and years of service credit totaling at least 80 (the “Rule of 80”).

However, what if you don’t stay in your education role long enough to be eligible for your desired retirement benefits? This is my exact situation. That’s when you need to look into other options. It is possible to request a refund and withdraw all the accumulated contributions of your teacher retirement. The zinger is that your refund must happen if you permanently terminate your employment with a teacher retirement contributing employer and terminate your TRS membership. From there, one option is to rollover that money into a different retirement account, like an IRA. You’ll need to check your state’s rules about any tax penalties, and definitely consider speaking with a financial planner instead of doing this alone. 

The long and short of the story is that you don’t have to kiss that money goodbye if you leave your education role before you turn 65. You have options if you get the inspiration to transition into a different type of career sooner. Again, this is my story. In some situations it might even help your money grow at a healthy rate if it is invested well. However, as stated previously, everyone’s situation is different. Make a quick call to your teacher retirement service after you have done your own math. Once you hit midlife, there are certain numbers you must know…your health metrics and your retirement funds. If you are in any way fuzzy on those numbers, get to work and call in some professionals to talk you through it.

A full step-by-step guide to apply for a TRS refund for Texas educators can be found here: https://www.trs.texas.gov/Pages/active_member_refunding_member_account.aspx. For more information about refunds outside of Texas, please visit your state’s teacher retirement website. After all, it’s your money honey!