Ask Jack: I’m moving to another state to teach after 20 years of service. What happens to my retirement?

Ask Jack Jack Ehnes

Q: I have been teaching in California for 20 years and will soon be moving to another state where I plan to teach there. Will this affect my retirement or should I take a refund?

Working in another state after having worked in a CalSTRS-covered position does not affect the benefits you have already accrued. In fact, if you no longer work in a CalSTRS-covered position, you can leave your money in CalSTRS until you are ready to retire or request a refund.

Keep in mind your benefit is based on a formula set in law, that formula includes your service credit, age factor and final compensation. If you leave your money in CalSTRS, your benefit will continue to increase because the age factor will continue to increase until age 63; however, your final compensation will remain the same. Furthermore, the benefits of leaving your contributions with CalSTRS include:

  • You will keep your service credit.
  • Your accounts will continue to accrue interest.
  • You will be eligible for a monthly retirement benefit by as early as age 55 with at least five years of service credit. 

However, if you choose to receive a refund, carefully consider the consequences which include: 

  • You are no longer a CalSTRS member.
  • You will cancel your eligibility for your CalSTRS retirement benefit, as well as survivor and disability benefits, unless you return to CalSTRS-covered employment.
  • Any option beneficiary or one-time death benefit designation will be cancelled. 
  • You must receive the total balance of your Defined Benefit Supplement account as a termination benefit. You cannot redeposit this distribution.
  • Your refund and termination benefit may be taxed as income unless they are rolled into a qualified retirement account. CalSTRS is required to withhold 20 percent federal income tax on all payments distributed directly to you. If you choose to have state income tax withheld, CalSTRS will withhold at 2 percent. You may have to pay additional federal and state taxes if you take your refund before age 59½ and do not roll over your funds to a qualified retirement plan.
  • You may not redeposit your contributions unless you re-qualify for CalSTRS membership or are eligible for concurrent retirement.
  • Your Social Security benefit, if you are eligible to receive one, may be offset by two federal rules, the Windfall Elimination Provision or the Government Pension Offset.    

You can find more information about your CalSTRS benefit in the 2015 edition of the CalSTRS Member Handbook