How much of my retirement contributions will I get back if I leave my job?
I'm employed with the local public school system. I began working for them eight years ago. Through my employment, I have been having an amount deducted from my check to be placed in a retirement account through the school system. The system has been adding funds to it as well, but what I am concerned about is the part I have been contributing.
I have decided to leave my job and stay home with my kids full-time. Since my retirement account is not a 401K, it can't be "rolled over". So, I am assuming the school system will have to return my retirement contributions to me, minus what they have contributed and local taxes. Am I correct? If so, will this amount automatically be federally taxed, or will I have to report it on my next tax return?
I'm so confused! I don't want to call my employer to ask these questions if I can help it, because I don't want it to sound like I'm more concerned about my money than all they have done for me over the past few years.
- Mr. GLv 61 decade agoFavorite Answer
It depends on the state where you are located. I teach in PA. I can tell you what you would be able to do in PA.
In PA, you are vested after 5 years, which means you can collect (with penalties). If you choose to collect, it will be a small amount (the math is too much for Y!A). You can contribute this amount to another retirement fund.
Or, since you are probably young, and there is the posibility that you will go back to work when your kids get older, you could do nothing. The account will stay as it is. Upon retirement age, you can collect off of it with no penalties (although the pension will only be based on 8 years of service rather than a regular 35+ year career).
Does your state have a teachers' association (union)? The association in your state would be a great place for more specific answers to your questions.
- PALADINLv 41 decade ago
Under ERISA (Employee Retirement Income Security Act), the vesting period is 5 years which means that you have to have at least five years of service to be eligible to collect the Employer "match". Some plans "vest" (entitle) 20%/ year from date of hire; others "vest" 100% after 5 years. Of course, your contributions are not subject to the vesting rules.
You will need to talk with someone as to the details of the plan. I'm almost 100% certain that you can "roll over" the monies in your account (an IRS approved account similiar to a 401(k), can't think of the IRS Section Number at the moment) to an Individual Retirement Account (IRA) and defer the taxes until you begin to withdraw the funds from that account. (You can begin to withdraw at age 591/2 and the account must be depleted/closed after your 70th birthday.)
If you have any concerns about the account, the distribution, "roll-over" time limits, and the like, you can call the local IRS office (anonomously, or "for a friend", if you have a concern that they will track you) they will be glad to answer any questions you have.