If you still have assets in your TRS retirement account, it might be time to consider moving them into an IRA.

As of September 1, 2014, TRS will no longer credit you with the 5% annual rate of return that you’ve received in the past.  While this guaranteed rate of return has always served as a good reason for former teachers to leave assets behind in their TRS accounts, this benefit will soon be long gone.  The current 5% annual rate of return will decrease to a mere 2% when the changes go into effect in September, significantly reducing your future account balance.

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If you’re wondering how big of a deal this will be, consider the following example:

If a teacher taught for 6 years in the public school system before changing careers, they would separate from service with approximately $17,500 in their TRS account.

If they still had 30 years until retirement, their future account values would be as follows:

  • $75,634 at the previous 5% rate of return after 30 years
  • $31,699 at the new 2% rate of return after 30 years.

I’m confident that most people would consider this to be a big deal, yet very few former teachers that I’ve spoken with had any idea that this was coming.

Before you run out and liquidate your accounts however, keep in mind the following considerations:

  1. Your age
  2. Which TRS Tier you’re eligible for
  3. How many years of service you have accumulated
  4. What other retirement assets you have in combination with this TRS account

If you do choose to move your account from TRS, make sure you consult with them about doing it through a trustee-to-trustee transfer.  This should help ensure that you don’t pay current taxes or penalties for moving it.  Also, make sure that you understand that you’ll be waiving your rights to future TRS benefits.

I feel strongly that many young teachers, who taught for less than 15 years, will benefit from rolling over their assets to an IRA, but not before giving it the proper consideration.

Moving your assets away from TRS will give you the opportunity to seek investments that could have higher returns than 2% between now and retirement.  However, there could be some drawbacks to this strategy depending on some of the above considerations.  Be sure you make an informed decision.

If you have any questions, or would like to discuss your TRS retirement account, feel free to give us a call.  We would love to help you decide if an IRA rollover is right for you.