Unfortunately, we talk to TCTA members quite often who have made retirement decisions that they later regretted. There is usually little to nothing that can be done, as most options cannot be changed after retirement. Retirement planning should begin well before you are actually ready to leave work, and the decisions that need to be made will require time and planning. And yes, there will be math involved. The following are the top 12 ways that you can mess up your retirement:

THROUGHOUT YOUR CAREER

  1. Ignore your annual statements from TRS. It may seem like just another piece of mail, and may not even appear important if you’re years away from retirement – but don’t treat your annual statement from TRS like junk mail. It is absolutely crucial that you know what your TRS records say; for example, any discrepancy in the number of years of service credit can affect your ability to retire when planned and the amount of your annuity, and you may only have a short window of time to correct errors.
  2. Withdraw your money without thinking it through. Many school employees leave their jobs temporarily and, strapped for cash, withdraw their money from TRS. This decision can have retirement implications many years down the road. You may wish to reinstate those years of service credit in order to bump up your retirement eligibility or the amount of your benefit, but purchasing that time can be very expensive. In addition, recent changes in law provide that if you re-enter TRS-covered employment after Sept. 1, 2007, having previously withdrawn your service credit, you are considered a new employee for purposes of retirement eligibility. In addition to meeting the Rule of 80 to be eligible for normal retirement, you would have to be at least age 60 to receive your full benefit. 
  3. Ignore deadlines now. Changes in TRS laws and rules in 2011 could affect your ability to buy back service credit. If you have unreported service (e.g., substitute service of at least 90 days in a year), out-of-state service, withdrawn service, etc., you will face much higher costs if you wait until September 2013 to begin the purchasing process. In addition, if you need to validate unreported service credit (ensuring that TRS has the information necessary to establish that you did indeed work at the relevant place and time), it must be done within a five-year period after the service is completed. Current employees have a grace period until 2016 to verify the service. Call TRS to confirm the specific deadlines that apply to you (800-223-8778).
  4. Don’t maintain other savings/investments. So many school employees are scraping by on meager to moderate salaries that finding extra cash to invest seems like a difficult task. But it’s an important one – remember that you may not be eligible for Social Security benefits, and you can’t count on regular increases in your TRS annuity. Do the research to find low-fee investments (don’t just buy into whatever is being offered through your school district) and if you’re not paying into Social Security, consider investing at least the 6.2% of your salary that you’d be contributing if you were. 

NEARING RETIREMENT

  1. Retire before you can afford to. It’s common for teachers to get burned out, especially these days when the work is getting tougher and the rewards harder to come by. So when an educator hits that magic “Rule of 80” (the benchmark for normal retirement: age plus years of service credit equal at least 80) it can be very tempting to take the plunge – only to find out that monthly check from TRS may not be enough to keep up the lifestyle you prefer (like eating). Retirement should never be a spur-of-the-moment decision; determine how much money you need to live on and figure out whether your monthly TRS annuity is going to cover your costs.
  2. Ignore all your potential salary credit. We’ve worked with TRS on behalf of many members who realized – too late – that they didn’t receive full credit for all of the compensation they were entitled to in their benefit calculations. This typically happens with compensation other than normal salary, such as stipends or workers’ compensation payments. If TRS does not have this information on file for you and it’s not corrected by the time you receive your first TRS check, you may be out of luck. Always examine your TRS statements to make sure you’re receiving credit for all of the compensation you’re entitled to. 
  3. Assume you’ll be able to (or worse, actually enter into a premature agreement to) return to work. A subset of the “don’t retire before you can afford to” rule, this has been a problem for many retirees. A well-respected teacher may retire “knowing” that he or she will be rehired, only to find out that the position is no longer available. It’s actually against the law to enter into an agreement with your district before you have retired to return to work, so if you’re sticking to the letter of the law and not discussing your future employment with an administrator, you only have your own optimism on which to base your understanding. Also, note that a new law prevents you from receiving your TRS pension checks if you return to work unless you have refrained from employment with a school district or other TRS-covered entity for a full 12 months after retirement before returning to work. 
  4. Assume you’ll have access to Social Security benefits. Don’t be caught by surprise at the end of your career, expecting to receive hundreds of dollars in monthly Social Security benefits. While some Texas school employees pay into or are otherwise entitled to Social Security, the vast majority are not. Rather than providing a full explanation here, we’ll direct you to TCTA’s Survival Guide for information on the two provisions in federal law that reduce or eliminate Social Security benefits, both spousal benefits and any you’ve earned through previous employment where you paid into Social Security. There are exceptions to these provisions, so just make sure you know where you stand and don’t count on those benefits until you’ve checked out your situation with a Social Security representative.
  5. Assume you’ll get regular cost-of-living increases. Although Texas does not provide automatic cost-of-living increases for school retirees, for many years the Texas Legislature was relatively generous, approving benefit increases nearly every legislative session. However, with the state’s current budget struggles, an ongoing increase has not been provided since 2001, and only a single one-time bonus was approved in the meantime. Retirees who have access to Social Security benefits may get more frequent cost-of-living adjustments, but most school retirees do not receive a substantial (or any) Social Security benefit (see #8 above).
  6. Forget to check into TRS-Care criteria. TRS-Care health insurance is a very valuable benefit of retirement, but you must meet eligibility requirements at retirement to participate. Generally, the requirement is that you have at least 30 years of service credit or meet the Rule of 80 with at least 10 years of service credit, but if you have any purchased service credit you should check with TRS to see if that affects your eligibility. Also, think carefully about which insurance option you choose – you may think the least expensive option is preferable when you’re 55 and healthy, but you won’t be able to upgrade your coverage until you turn 65 (and that’s a one-time switch).
  7. Take the Partial Lump Sum Option (PLSO) when you can’t afford to. We’ve mentioned the temptation of quick cash, and receiving up to three years of your TRS payments in a lump sum can be a big help to many retiring teachers. However, the lowered monthly payments may not be a smart trade-off. Know exactly what your monthly payments will be before you make this irrevocable decision.
  8. Wait until the last minute to tell TRS you’re retiring, and/or get your paperwork in late. TRS benefits counselors recommend that you begin the process at least six months prior to your preferred retirement date. You can’t receive your TRS checks until all forms have been processed and your district submits its final payroll report to TRS.