Author Topic: Government pension contributions: to roll or not to roll?  (Read 939 times)

Ms Independent

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Government pension contributions: to roll or not to roll?
« on: February 02, 2015, 04:40:31 PM »
    So here's a pretty specific circumstance.

    I was with the City of Austin for 2.5 years ... 2.5 years ago. To vest, you need to have been there for 5 years. I have $12K worth of contributions in their Employee Retirement System.

    I wanted to roll over to a traditional IRA, but when I went to do so, I learned the following:
    • If I ever go back to the city or another state of Texas agency (the state, Teacher Retirement System, etc.), my 2.5 years in the system count toward eligibility for future pension benefits.
    • If I pull the money out of the system, I could still take advantage of those benefits if I buy my 2.5 years back, but they would be very expensive to buy back compared to what I pulled out. I would have to buy back my contributions ($12K), plus the city's contributions on my behalf ($12K), plus the growth on all of that in the years since the contributions were originally made.
    [/list

    I left the office without rolling over and decided to mull it over* instead. Here are considerations:
    • I am aiming for FIRE in 2-3 years ... but life is an uncertain journey. So I could be currently in the last conventional job I will ever have ... or not. Husband could drop dead, or market could crash, or Many, Many Other Things Could Happen.
    • I'm kind of interested in a job at the University of Texas (not an actual job that exists, but a potential job that may exist at some point in the next year), which would be one of those Texas government retirement systems where my 2.5 years paying into the city's pension plan would be an advantage. I think if I worked just 2.5 years there, I'd be vested and eligible for a pension (15% of my highest income) at age 62 or something. Maybe that would be my last job.
    • I have up to 7 years to roll over after leaving the city, or 4.5 years remaining on that clock.
    • All my money does for me as long as I leave it in the city pension system is earn about 1% interest/year.

    Here's what I'm thinking: Given the possibility that I might want to pursue a job at the university in the next year, I'm inclined to leave it because it is so much more valuable in its Highest Possible Form (pension forever and ever) than its current form (12,000 smackeroos). Then again, the likelihood that the right job would come up at the university AND I'd get it AND hang onto it long enough for it to matter is reasonably low.

    Still, I'm thinking I might preserve the possibility by leaving it be for now ... and then adjust our portfolio to accommodate $12K in a very low risk format (maybe let it take the place of some bonds?). Then, if it seems like it will not be useful as a someday pension, I wait for the the next dip in the stock market and use it to buy index funds.

    Thoughts?

    *If that were a hairstyle, it'd be a mullet with a combover. Very, very special!
« Last Edit: February 02, 2015, 04:46:12 PM by Ms Independent »

Ms Independent

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Re: Government pension contributions: to roll or not to roll?
« Reply #1 on: February 02, 2015, 04:43:52 PM »
Totally taking back the bad mullet over joke. The Internet already thought of it. Leaving it in original post to allow fun-poking and generate goodwill.
« Last Edit: February 02, 2015, 04:46:41 PM by Ms Independent »