ADVICE on cashout my AZ Public Safety Pension and doing???

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Topic Author
boatmana
Posts: 2
Joined: Fri Aug 01, 2014 7:27 pm

ADVICE on cashout my AZ Public Safety Pension and doing???

Post by boatmana »

I recently moved states and with that have a decision on what to do with my pension from the Arizona Public Safety Retirement System (AZ PSRS). I've waited about a year and the money is stagnant and will not create any interest as it is a part of defined pension. I have no desire at this time to return to AZ to become fully vested where I could retire... I have various options on what to do with the money roll it, cash it out start something new etc etc. I have about $41,000 in the account. Please help me with some advice.

I am new and young in my investing so any advice is greatly appreciated.
I make about $50,000 per year and have a new 457B that i contribute 10% per pay period to less than 5K in it, Roth that also gets 10% with about 5k in it, a Trad IRA that i dont contribute to that has about $30k in it. Ive spent most of my savings on my home in AZ that is now my rental. From the AZ PSRS website I have the options of doing the following without paying any tax penalties as this money is pre-taxed.

401a Qualified Defined benefit Plan
401a Qualified Defined Contribution Plan (includes 401k)
403a Qualified Annuity Plan
403b Tax Shelter Annuity
408a Trad IRA (includes SEP IRA)
408b Individual Retirement Account
457 Govt Deferred Comp Plan

thanks again
AB
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retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: ADVICE on cashout my AZ Public Safety Pension and doing?

Post by retiredjg »

boatmana wrote:I recently moved states and with that have a decision on what to do with my pension from the Arizona Public Safety Retirement System (AZ PSRS). I've waited about a year and the money is stagnant and will not create any interest as it is a part of defined pension. I have no desire at this time to return to AZ to become fully vested where I could retire... I have various options on what to do with the money roll it, cash it out start something new etc etc. I have about $41,000 in the account. Please help me with some advice.

I am new and young in my investing so any advice is greatly appreciated.
I make about $50,000 per year and have a new 457B that i contribute 10% per pay period to less than 5K in it, Roth that also gets 10% with about 5k in it, a Trad IRA that i dont contribute to that has about $30k in it. Ive spent most of my savings on my home in AZ that is now my rental. From the AZ PSRS website I have the options of doing the following without paying any tax penalties as this money is pre-taxed.

401a Qualified Defined benefit Plan
401a Qualified Defined Contribution Plan (includes 401k)
403a Qualified Annuity Plan
403b Tax Shelter Annuity
408a Trad IRA (includes SEP IRA)
408b Individual Retirement Account
457 Govt Deferred Comp Plan

thanks again
AB
If the choices in your new 457b are good, rolling it there could be a good idea. Other options are rolling it into your new pension plan if you have one (Qualified Defined benefit plan) or into an Individual Retirement Account (probably the 408b). I would probably roll it into IRA with the new 457b as a second choice. This doesn't mean that rolling it into your new pension is a bad idea, just not my favorite.

What do the choices look like in your new 457b? How is the money in your tIRA and your Roth IRA invested?
sscritic
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Joined: Thu Sep 06, 2007 8:36 am

Re: ADVICE on cashout my AZ Public Safety Pension and doing?

Post by sscritic »

A 408(b) is an individual retirement annuity. It's an IRA held at an insurance company.
(b) Individual retirement annuity
For purposes of this section, the term “individual retirement annuity” means an annuity contract, or an endowment contract (as determined under regulations prescribed by the Secretary), issued by an insurance company which meets the following requirements:
yada yada yada
An annuity in this context is a type of an individual retirement account, but people who use the words individual retirement account usually mean something different (the a thing).
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retiredjg
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Re: ADVICE on cashout my AZ Public Safety Pension and doing?

Post by retiredjg »

Thanks! I wondered why they had 2 categories for IRA.

In that case, scratch the 408(b) and insert the 408(a) - Traditional IRA.
Topic Author
boatmana
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Joined: Fri Aug 01, 2014 7:27 pm

Re: ADVICE on cashout my AZ Public Safety Pension and doing?

Post by boatmana »

Correct me if I'm wrong but I'm leaning towards the 457 which is ran or associated with fidelity investments. Through the fppa (fire police pension association of Colorado) reason being is because the withdrawal period is not age specific. Meaning I must be retired status not a specific age ie 59 1/2. Most fireman retire before this age. To buy time or reinvest into the fppa pension system there is a formula for buying years of service. In my math it is worth buying about 2 years then rolling rest in to 457. Reason being is I have to be at least 55 to hit normal retirement otherwise I'm slated as early retirement and receive a lot less %. Also quite expensive to buy years of service about 10k year. Colorado is a very conservative pension system that is years of service and age dependant. Thanks everyone for the advice.
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retiredjg
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Re: ADVICE on cashout my AZ Public Safety Pension and doing?

Post by retiredjg »

Rolling some to your new pension and some to the 457b is fine - if the choices in the 457b are good. If your 457b is lousy, I'd put that portion of the money into tIRA at Vanguard so you can get low cost choices.

The fact that your 457b is at Fido is somewhat promising, but occasionally we see really poor plans administered by Fido.

You are correct that 457b money is available penalty free (but you will pay taxes) when you separate from the agency. However, it seems you should have plenty of years to contribute enough to the 457b to carry you through to age 59.5, even if you do put part of the $41k into tIRA instead of 457b.
Corleone
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Joined: Wed Jul 09, 2014 10:14 am

Re: ADVICE on cashout my AZ Public Safety Pension and doing?

Post by Corleone »

I don't know how it is in CO, but here in Ohio we can use our 457 money to purchase years of service. Obviously the closer you get to retirement the more it costs, but as long as you earn an average return(I understand nothing is absolute), you should at least break even if you decide to purchase years at a later date. I personally am putting off buying years due to the fact that time and age restrictions in a DB pension can change at any time and I would hate to buy years and have it be a waste if they were to raise the age or service minimums.
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