Retirement Options for Idaho & Utah Professors with a PERSI/URS Account

As a professor in Idaho or Utah nearing retirement, navigating your options with your Public Employee Retirement System of Idaho (PERSI) or Utah Retirement Systems (URS) account is crucial for ensuring a financially stable future. PERSI/URS offers a variety of choices tailored to meet diverse retirement needs, from withdrawal options to retirement benefit plans. This article outlines the primary options available to you.

Understanding PERSI/URS Account Withdrawal

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Upon retirement, one of the first considerations is whether to withdraw your PERSI/URS funds or leave them within the system to continue earning interest and potentially increase your benefits. According to PERSI/URS's guidelines, you have several choices regarding withdrawal:

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1. Lump-Sum Withdrawal: You can opt for a one-time, lump-sum payment of your contributions plus interest. This option provides immediate access to your funds but comes with tax implications and potential penalties if you are under the age of 59½. Most of the money you receive will be taxed as Ordinary Income. This option has the highest tax burden and should only be considered for a very specific reason.

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2. Rollover: You may roll over your PERSI/URS funds into another eligible retirement plan, such as an IRA or another qualified employer plan. This option allows your funds to continue growing tax-deferred. Many professors as they move jobs will continue to rollover previous accounts, when they’re able to. This is the most common option when a professor retires, as it gives them the most control over their money.

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3. Leave Funds in PERSI/URS: By leaving your funds within PERSI/URS, you allow your account to continue earning interest until you decide to retire. For those who choose to annuitize their money, give the account balance to the company that currently hold the money and in return be given a guaranteed monthly income, this is the option you should choose.

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4. Partial Lump-Sum Option (PLSO): This allows you to receive a portion of your funds as a lump sum while the remainder is paid out as a monthly retirement benefit. This hybrid approach can provide immediate funds while still securing long-term income.

Deciding which option is best for you can be tricky. Each option follows the old saying, “If you pick up one end of the stick you pick up both.” Each option has its pros and cons. Rollover allows you to control your money by investing it and being able to withdrawal money as you please, but you continue being subject to stock markets’ ups and downs. While annuitizing the money guarantees you a monthly income, you lose a lot of your liquidity.

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Answering this question often can be answered by having a financial advisor walk you through the options and help you identify which best fits you. Personally, at Intermountain Wealth Management, we have a simple worksheet that breaks down which option may be the best fit. Feel free to reach out to us to get that worksheet for free.

Retirement Benefit Options

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When you are ready to retire, PERSI/URS offers several retirement benefit options to cater to your specific needs. The goal of these options is to give you the flexibility to share your pension with your spouse if you were to pass away before him/her. Remember, once elected, this cannot be changed. The primary choices include:
1. Option 1 - Regular Retirement Allowance: This option provides the highest monthly benefit but ceases upon your death, offering no further payments to a beneficiary.
2. Option 2 - 100% Contingent Annuitant Option: This reduces your monthly benefit to provide a continued monthly benefit of the same amount to your designated beneficiary after your death.
3. Option 3 - 50% Contingent Annuitant Option: Similar to Option 2, but your designated beneficiary receives half of your monthly benefit after your death.
4. Option 4(a) - Social Security Adjustment Option: This option offers a larger monthly benefit before you reach Social Security eligibility age (62 or 65) and a reduced benefit after, aligning with the start of your Social Security payments.
5. Option 4(b) - Additional Contributions Option: This allows members with additional contributions in their account to receive a higher monthly benefit based on those extra funds.

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Additional Considerations

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For professors considering retirement, it's essential to factor in several additional elements:
- Service Credit: Ensure you understand how your years of service and any purchased service credits will affect your retirement benefits. More service credit generally translates to higher benefits.
- Cost-of-Living Adjustments (COLA): PERSI/URS periodically adjusts benefits to keep up with inflation, which can significantly impact your retirement income over time.
- Health Insurance: Assess your post-retirement health insurance needs and explore whether PERSI/URS offers any relevant programs or if you need to seek alternative health coverage options.

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Planning Ahead

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Proper planning is critical to making the most of your PERSI/URS benefits. Utilize PERSI/URS's resources, including their member handbook, brochures, and personalized counseling, to understand your options thoroughly. Engage with a financial advisor to tailor your retirement strategy to your personal financial goals and circumstances.

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In conclusion, as a professor in Idaho or Utah, you have multiple avenues to explore with your PERSI/URS account when contemplating retirement. Whether opting for a lump-sum withdrawal, rolling over funds, or choosing from various retirement benefit plans, each option carries unique benefits and implications. By planning strategically and leveraging available resources, you can ensure a secure and fulfilling retirement. If you have doubt or hesitance, reach out to a trained professional that has your best interest in mind.

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Sources:

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https://www.PERSI.idaho.gov/members-1/account-withdrawal-and-buyback/
https://www.PERSI.idaho.gov/docs/brochures/Withdrawing-Your-PERSI-Funds.pdf
https://www.PERSI.idaho.gov/docs/news/publications/PERSI-Member-Handbook.pdf
https://www.PERSI.idaho.gov/docs/brochures/Retirement-Options.pdf
https://www.urs.org/Members/urs-pension-plans
https://www.urs.org/Members/Tier2

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Intermountain Wealth Management is a Registered Investment Adviser (RIA). The company manages several fee-based portfolios comprised of various equity and fixed-income investments that may include exchange traded funds (ETF’s), stocks and mutual funds. This is not a prospectus or an offer to sell any security. Please read the prospectus of any investment before you invest. The information included here is intended for education and information purposes only.

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