Teacher Retirement: Which reimbursement is best for remaining sick days?

[Stillwater1971]

I am an educator in Texas and we receive 10 personal/State sick days per year. If all goes well at retirement next year, I will have around 85 sick days remaining at retirement. At Retirement, we have some financial options with our remaining sick days.

1. Receive one-half daily rate x # of personal sick days

2. 50 personal sick days can be used towards 1 year of service credit

#1 Those 50 personal days at 1/2 the rate would be around $11,250.
#2 Service credit- an extra $2,070 per year towards my pension

I will be 55 years of age at retirement.

It seems like #2 is the best way to go as I would make up the #1 payout within 6 years assuming I don't kick the bucket.

But I also know that I could invest that 11K at retirement for the next 6 years so it may take longer for me to "break even".

What do you feel is the better option to take?

Thank you for listening!

[Workinprogress]

I have heard some say that the pension gives a bit of freedom to spend if one is a super saver. Easier to spend money that goes to a checking account, than to withdraw from retirement savings for that same spending.

One consideration is whether the pension is COLA.

[Stillwater1971]

I have heard some say that the pension gives a bit of freedom to spend if one is a super saver. Easier to spend money that goes to a checking account, than to withdraw from retirement savings for that same spending.

One consideration is whether the pension is COLA.

While educators do get a small lump sum every 5 years or so, there is no COLA.

[Mike Scott]

I would go for service credit (and that is my own plan for my accumulated sick leave). Will they do partial year credit for less than 50 days or can you cash out the remaining days?

[Stillwater1971]

I would go for service credit (and that is my own plan for my accumulated sick leave). Will they do partial year credit for less than 50 days or can you cash out the remaining days?

I'm not aware of a partial year of credit. I will have around 55 days under my personal days and 35 days under my local sick days. So cashing out my remaining 35 days looks likely, but still is a very good question. I plan on asking but it looks like I'll be able to cash out the 35 days and get an additional year of service from my personal.

[JPM]

Taking the service credit is a bet on one's own longevity. IMO betting on one's own longevity is a good bet for a reasonably healthy well-educated 55 year old as long as OP is a nonsmoker and has no more than one oz of alcohol per day (2oz if a male). Teachers generally have good medical available and good medical can add to longevity in most cases of educated middle-agers.

[Quaestner]

I’m jealous! This teacher get zip for his 200 sick days! (Well, I do get the right to buy some retirement credit, but it’s at my expense.) If your math is right, I’d take number 2 in a heartbeat. Then maybe you could take a bit more risk with the rest of your portfolio if you felt the need?

[AlaskaTeach]

Former Texas teacher here.

I thought having the 50 days gave you the right to purchase one year of retirement credit....and that means you still have to pony up the big bucks to buy the one year of retirement credit. Did they change it, or am I correct?

Purchasing service credit is a bet on your longevity, no doubt. At age 55 you will almost certainly live to 61, so buying the year makes sense, but it would be even better if the 50 days entitled you to a year's extra credit.

[ddbtoth]

Buying a year of service credit takes 50 unused sick days and money (for me it would have been $22k) which would take 12 years to make back the “$ investment”. Check with TRS how much they would charge in addition to the 400 hours. I took the cash - in my case $12k (150 odd days) and put it into VTSAX.

[the_wiki]

Assuming you let it sit for 20 years at 8%, $11250 would grow to about $55k. Investing $2070 a year for 20 years at 8% would give you about $100k. The only way the $11k wins is if you need to spend it in the next 3-4 years. Given that $11k is not a life changing amount these days, I would take the long term income easily.


 

[slickwillie]

Buying a year of service credit takes 50 unused sick days and money (for me it would have been $22k) which would take 12 years to make back the “$ investment”. Check with TRS how much they would charge in addition to the 400 hours. I took the cash - in my case $12k (150 odd days) and put it into VTSAX.

Agree with Alaska Teach I just talked to TRS last week you just need the required vacation or sick days. They don't take any of those days. Instead they calculate an actuarial value to purchase the credit, the 22k you mention.

[alpenglow]

I’m jealous! This teacher get zip for his 200 sick days! (Well, I do get the right to buy some retirement credit, but it’s at my expense.) If your math is right, I’d take number 2 in a heartbeat. Then maybe you could take a bit more risk with the rest of your portfolio if you felt the need?

Wow. In that case, I think I'd be a little less healthy.

[ClaycordJCA]

This topic is now in the Personal Finance (Not Investing) forum.