Question for teachers.....Purchasing prior service credit towards your pension

[Anonymous]

This question is just geared towards teachers, or those who know about teacher pension systems.
Our family is not high income so a pension is a big part of our retirement planning.

When does it make sense to purchase service credit towards a teacher pension in one state, if you have in the past worked several years in a public school in a different state or for a private school?

When would it not make sense?

[Anonymous]

I am in MD and have not retired yet, so I don't know all of the ins and outs of purchasing service. I work in MCPS where we have a pension with MCPS and the state of MD. I was able to purchase credit from the county after I came back from 3 years of childcare leave. I have been told that I can't purchase years from the state pension until I am actually planning on retiring. From what I have heard is that the cost is significant for purchasing years from the state. Most teachers I have talked to have said that it is crazy expensive.

[Anonymous]

Anonymous wrote:I am in MD and have not retired yet, so I don't know all of the ins and outs of purchasing service. I work in MCPS where we have a pension with MCPS and the state of MD. I was able to purchase credit from the county after I came back from 3 years of childcare leave. I have been told that I can't purchase years from the state pension until I am actually planning on retiring. From what I have heard is that the cost is significant for purchasing years from the state. Most teachers I have talked to have said that it is crazy expensive.

Thanks -- do you have a sense of how crazy expensive?

I think this year I paid about $7000 into my pension for a year of credit.

Would it be something like $10,000 for a year at retirement? Or more?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am in MD and have not retired yet, so I don't know all of the ins and outs of purchasing service. I work in MCPS where we have a pension with MCPS and the state of MD. I was able to purchase credit from the county after I came back from 3 years of childcare leave. I have been told that I can't purchase years from the state pension until I am actually planning on retiring. From what I have heard is that the cost is significant for purchasing years from the state. Most teachers I have talked to have said that it is crazy expensive.

Thanks -- do you have a sense of how crazy expensive?

I think this year I paid about $7000 into my pension for a year of credit.

Would it be something like $10,000 for a year at retirement? Or more?

I looked into it for my state. I taught in a private school over 20 years ago. It was some crazy amount of money because it factored in the amount I would be paying into per year plus all the interest that amount would have earned over the years. I want to say that it was like 65K for two years of teaching. If you plan to do it, do it asap. Don't wait.

[Anonymous]

I agree that it is by state. I am in Virginia. My understanding is that this used to be a great deal until about 5-10 years ago. Then they changed the system and it really isn't worth it any more if you do the cost comparison. Obviously I'm just giving you here say based on talks with my colleagues, so you need to check it out, but the scuttlebutt is that the cost isn't worth it in Virginia.

[Anonymous]

If you are in Maryland you can make an appointment with the people in Baltimore to do a sit down to discuss this. A coworker did this and ultimately decided not to purchase service.

[Anonymous]

In Maryland, you have to wait till the year before retirement to purchase the service credit for prior years, so you can’t do it any earlier.

Someone who went through the process told me it was $90,000 for a year of service credit in her case.

[Anonymous]

If I may piggyback off this thread…
I’m a 10-year teacher in CT who took 20-21 off to care for our new baby. Retirement board told me it’s going to cost $5k to purchase that year.
I’m a bit confused as to what I’d be getting should I buy the year: essentially, when I retire, my pension will be as if I never took that year off? Will it also count as a year of service toward my retirement date?

[Anonymous]

I live in Iowa. It’s prohibitively expensive to buy years. Like 170k a year. That said, our pension is outstanding.
Three more years for me.

[Anonymous]

Anonymous wrote:If I may piggyback off this thread…
I’m a 10-year teacher in CT who took 20-21 off to care for our new baby. Retirement board told me it’s going to cost $5k to purchase that year.
I’m a bit confused as to what I’d be getting should I buy the year: essentially, when I retire, my pension will be as if I never took that year off? Will it also count as a year of service toward my retirement date?

That's a really good deal!

You have to read your retirement plan handbook to be sure, but yes, if you purchase the year of retirement credit it adds to the total number of years credit you will have. However, if your school district gives you a raise each year in the form of a step increase, your salary won't have gone up that year, so your highest 3 year salary average may be lower than it would have been if you hadn't taken that year off.

[Anonymous]

Anonymous wrote:If I may piggyback off this thread…
I’m a 10-year teacher in CT who took 20-21 off to care for our new baby. Retirement board told me it’s going to cost $5k to purchase that year.
I’m a bit confused as to what I’d be getting should I buy the year: essentially, when I retire, my pension will be as if I never took that year off? Will it also count as a year of service toward my retirement date?

Not sure, talk to someone at the pension office, but if you want to "buy" that year, do it ASAP. It gets more expensive each year that you wait.

[Anonymous]

I am in Maryland and in the process of planning my 'exit ticket' also known as retirement, which is approaching soon. I have a significant number of years of prior service in another state, and I recently made a formal request for verification of this service.

As I eagerly await the verification, I find myself quite anxious about the outcome. To add a personal perspective, my grade-level Administrator, who coincidentally shares my age and years of service, mentioned that the process is being deemed 'cost-prohibitive.' In fact, she was quoted a staggering $45,000 for the verification of just two and a half years of her own previous service. It's important to note that my grade-level Administrator holds an administrative position and receives a corresponding salary.

While this revelation might initially lead to discouragement, it's essential to consider the bigger picture. My love for my job runs deep, and I had never contemplated retiring 'early'. However, I've come to realize that my life holds far more value than any job or career. To make this transition feasible, I've taken steps such as upping my 403b contributions to the maximum allowed. These contributions will provide the funds necessary to purchase my time I am essentially rolling it from one retirement account to another, allowing me to retire one and a half years earlier than originally planned.

In sharing this journey, I hope to shed light on the financial challenges that individuals like me face when it comes to verifying prior service years. It's a topic that deserves our attention and consideration, as it impacts the choices we make in planning our retirements. Despite these challenges, I remain optimistic about the future and the opportunities that lie ahead.

[Anonymous]

Did you get a cost for this 1.5 years yet? How many years of service do you currently have? I am thinking about doing the same thing, so I am curious what the cost per year is.

[Anonymous]

Anonymous wrote:I am in Maryland and in the process of planning my 'exit ticket' also known as retirement, which is approaching soon. I have a significant number of years of prior service in another state, and I recently made a formal request for verification of this service.

As I eagerly await the verification, I find myself quite anxious about the outcome. To add a personal perspective, my grade-level Administrator, who coincidentally shares my age and years of service, mentioned that the process is being deemed 'cost-prohibitive.' In fact, she was quoted a staggering $45,000 for the verification of just two and a half years of her own previous service. It's important to note that my grade-level Administrator holds an administrative position and receives a corresponding salary.

While this revelation might initially lead to discouragement, it's essential to consider the bigger picture. My love for my job runs deep, and I had never contemplated retiring 'early'. However, I've come to realize that my life holds far more value than any job or career. To make this transition feasible, I've taken steps such as upping my 403b contributions to the maximum allowed. These contributions will provide the funds necessary to purchase my time I am essentially rolling it from one retirement account to another, allowing me to retire one and a half years earlier than originally planned.

In sharing this journey, I hope to shed light on the financial challenges that individuals like me face when it comes to verifying prior service years. It's a topic that deserves our attention and consideration, as it impacts the choices we make in planning our retirements. Despite these challenges, I remain optimistic about the future and the opportunities that lie ahead.

Did you get a cost for this 1.5 years yet? How many years of service do you currently have? I am thinking about doing the same thing, so I am curious what the cost per year is.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am in Maryland and in the process of planning my 'exit ticket' also known as retirement, which is approaching soon. I have a significant number of years of prior service in another state, and I recently made a formal request for verification of this service.

As I eagerly await the verification, I find myself quite anxious about the outcome. To add a personal perspective, my grade-level Administrator, who coincidentally shares my age and years of service, mentioned that the process is being deemed 'cost-prohibitive.' In fact, she was quoted a staggering $45,000 for the verification of just two and a half years of her own previous service. It's important to note that my grade-level Administrator holds an administrative position and receives a corresponding salary.

While this revelation might initially lead to discouragement, it's essential to consider the bigger picture. My love for my job runs deep, and I had never contemplated retiring 'early'. However, I've come to realize that my life holds far more value than any job or career. To make this transition feasible, I've taken steps such as upping my 403b contributions to the maximum allowed. These contributions will provide the funds necessary to purchase my time I am essentially rolling it from one retirement account to another, allowing me to retire one and a half years earlier than originally planned.

In sharing this journey, I hope to shed light on the financial challenges that individuals like me face when it comes to verifying prior service years. It's a topic that deserves our attention and consideration, as it impacts the choices we make in planning our retirements. Despite these challenges, I remain optimistic about the future and the opportunities that lie ahead.

Did you get a cost for this 1.5 years yet? How many years of service do you currently have? I am thinking about doing the same thing, so I am curious what the cost per year is.

.

You might also want to consider the tax implications of using the 403b before age 59.5 You will pay a fed penalty of 10% along with typical yearly taxes probably in the marginal 22% area.

Staff considering adding pension years should start putting money into a brokerage account probably at least 5 years out or more. At least $500 a month.