Over the years I have praised the Teachers' Retirement System (TRS) for it's low administrative fees and their unbeatable Fixed Income Fund that gives an annual dividend of 7% for UFT members and 8.25% for other educators, with no fees! However, the one weakness TRS has is their lack of a ROTH option.
Unlike TRS funds which are tax deferred where appreciation is not federally taxed until the educator withdraws funds, usually after retirement. The Roth option allows the educator to pay taxes upfront and any appreciation accumulates tax free and is not subject to the Required Minimum Distribution (RMD) at age 72.
For educators near retirement the ROTH option is not as attractive since the educator would have to pay taxes upfront for any funds that are converted to a ROTH option. On the other hand newer and younger educators who have a long time to retirement, the ROTH option is very attractive since they make less money and the existing tax rates are historically low and can only go higher in the future.
Use this calculator to decide which is best for you once TRS offers a ROTH option. You can also see a comparison table between our tax deferred TDA and a ROTH option.
24 comments:
Is it true that when a retired teacher takes money from their TDA they only pay federal taxes on it?
I heard, from so many people, that for our TDA (and only our TDA) we pay no state or city taxes.
Thanks.
Any info about whether a member will be able to transfer funds from another tda fund, such as the fixed, into the proposed Roth tda? I am guessing it won't be possible.
Yes, thus far the TDA is handled the same way as our pension, no state or city taxes
There is no State and Local tax on TDA withdrawals.
thank you Chaz, as usual more good and useful information. The article was a good read read.
to 2:49 pm - In New York State all public pensions - state, municipal, police, fire, teaching etc, are not taxed by the state. This also applies to TDA withdrawls. If you have private IRAs or other funds, the first 20K is exempt from state income tax.
Hey Chaz do you know what happens to our extra money if we don't complete the 25/55 for age or time? Not, sure I can take another day of this shit after that last retro payment...
I believe they refund some of the 4.85% but you need to ask the UFT how it works and when you joined.
When does this take effect?
This is great news.
Also, some other good news or rumors:
Any truth to rumors the UFT has already hired extra attorneys to represent us when we meet with the FBI?
A principal directed her teacher to rent a U-haul van, drive to Jersey and burn 4 boxes of regents, attendance and grade changes but she did pay the teacher per session and compensated her for the U-haul rental.
How about the ciy for 457 how is
that taxed? City, State , Federal ?
And how much do the feds take? Percentage?
@8:07 I have same idea no chance I can do 55/25 in 18th year and even if I reach 25 I will be 47. Been paying into this for over 10 years too.
@shady...damn you're so funny
The 457 is not like our TDA and is not considered a pension. therefore, it is subject to State and Local taxes.
Will the roth option be in addition to the current $19,500 limit? Would it then be $25,500 max contribution limit with an additional $6,000 from the Roth to go to any of the options (fixed return or equity funds)?
I am unable to find any information regarding TRS possibly adding ROTH option. Can you direct me to link to get info. Thank you!
"New York State residents who are at least age 59½ AND take periodic payments are entitled to a New York State income tax deduction of up to $20,000 EACH CALENDAR YEAR on payments received from the Plan and other retirement plans". chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/https://www.tax.ny.gov/pdf/memos/income/m02_9i.pdf
"New York State residents who are at least age 59½ AND take periodic payments are entitled to a New York State income tax deduction of up to $20,000 EACH CALENDAR YEAR on payments received from the Plan and other retirement plans". chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/https://www.tax.ny.gov/pdf/memos/income/m02_9i.pdf
Wrong! The $20,000 limitation does not apply to the TDA and at age 55 an educator can start withdrawing their funds tax free from State and Local taxes.
I heard that the ROTH option will be offered in the next two years from TRS.
Can we withdrawal tax free at 55 only if we are retired? If we are still working we have to wait until 59 1/2 right?
Tax free from State and Local taxes and your correct at 55 if you retire.
There is city and state tax if withdrawal over $20,000.
This is true for all traditional iras
Wrong! There is city and state tax if withdrawal is over $20,000. The first $20,000 is free of city and state taxes. Anything over $20,000 will be taxed!!
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