Should I buy back my pension?

Discussion in 'General Education' started by schoolteacher, Apr 1, 2011.

  1. schoolteacher

    schoolteacher Habitué

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    Apr 1, 2011

    I have the opportunity to buy back 6 and 3/4 years of my pension (I worked for that long as a teacher and then took many years off to raise my children).

    I am trying to figure out the advantage of doing this. Why would this be better than putting the funds into one of the retirement plans I currently have?

    If anyone has any information to share about this, I would be very grateful.
     
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  3. mopar

    mopar Multitudinous

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    Apr 1, 2011

    If you buy back those years, it might raise how much you get in your pension. I know that if I work 30 years, I get full pension benefits, but anything under 30 and I get a smaller percentage of my final salary.
     
  4. Miss J. Pre-K

    Miss J. Pre-K Comrade

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    Apr 1, 2011

    Are you teaching currently or planning on returning to teaching?

    My dad taught for 7 years, quit and withdrew his retirement. He thought at the time he was "done" with teaching. He put some of it in savings and used some to make up his lesser pay with the job he got. When he returned 2 or 3 years later, it would have cost him about $8000 to "buy back" his retirement. He couldn't afford it at the time. When he was looking at retiring with 25 years vs. buying back his retirement and retiring with 32 years, the cost for buying back those 7 years was about $60,000! I guess the cost of inflation? He chose to retire with his 25 years (he has health problems and was just burnt out), but his retirement pay is about 75-80% of his previous salary. Had he either bought back his retirement or not withdrew it, he would be getting his full salary in retirement.

    So I would say, if you're teaching or going to teach again, and can afford it, put the money back in the system. You can still have other funds for retirement like CDs, stock and bonds, etc.
     
  5. CanukTeach

    CanukTeach Companion

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    Apr 2, 2011

    SchoolTeach,

    It really depends. I would suggest asking your union (if you have one) or speaking to a financial consultant who specialized in teacher pensions.

    In my district, we get 2% for every year we teach. We have to have an 85 factor (years taught plus age) to be able to retire. For most teachers (who teach their whole adult life) this means that they need to teach 30 years and they get 70% of their best 5 years as their pension. If you take a mat leave, etc you can buy it back. If you do it right away it is what you would pay if you were teaching. If you wait, it goes up.

    So you have to do the math. How much will it cost you? How much extra will you earn in retirement? Is it worth it?

    Basically if you are far from retirement it is usually worth it but if you are close it often isn't. But it really is about the math.

    Good luck figuring it out!
     
  6. Irishdave

    Irishdave Enthusiast

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    Apr 2, 2011

    I bought back
    Now I receive 93% (between retirement and SSD) of what I made the last 5 years of teaching
     
  7. silverspoon65

    silverspoon65 Enthusiast

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    Apr 2, 2011

    I just moved states and I have the opportunity to roll my into a retirement fund with no penalty, or roll it into my new states pension one year at a time. I think I am going to roll it into my retirement. I honestly don't really trust either state with my pension.
     
  8. schoolteacher

    schoolteacher Habitué

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    Apr 2, 2011

    Thank you all so much for the info. I am going to roll it over into my state's pension fund. I have another 16 years before I retire.
     
  9. Hoot Owl

    Hoot Owl Aficionado

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    Apr 2, 2011

    Call your State Department of Ed for specific answers to your question, they will/should crunch the numbers for you so you can make a wise decision.

    I think it would be to your advantage especially if you're young enough to really draw your retirement for a long time. I have a friend who retired at 52, she's strong and healthy and will draw a lot of money unless something freaky happens to her.
     

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