We understand that everyone's financial situation is unique, and you should proceed however is best for your situation. But how do you know “what’s best for me?” Let’s look at some basic information that may help point you in the right direction.
First off, if you plan on leaving your current employer, that doesn't mean you need to refund your retirement account. Hundreds of employers are members of the Arizona State Retirement System, meaning it’s possible to get a job at a new employer and keep building your pension. Also, contribution rates are set by the ASRS, not employers – no matter which employer you work for, if they’re part of the ASRS, the percentage withheld from your paycheck will remain consistent between employers.
If you do end up at a new employer who isn’t part of the ASRS? You still don’t need to refund your account if you don't want to - it’s completely up to you. Generally, this decision is based upon a combination of your age and years of service with the ASRS. For example, if you’re age 50 with at least five years of service, you may decide to take a reduced early retirement. (To get a better picture of where you stand, you can log into your secure myASRS where you can estimate retirement options and refund amounts.)
Alternatively, you may decide to leave your money with the ASRS. What’s the benefit of leaving your money with the ASRS if you’re no longer able to contribute to it? For starters, you could still receive a monthly lifetime pension when you hit retirement age. Also, it would mean you would still be eligible for health insurance coverage through the ASRS when you retire, and perhaps a premium benefit that would help lower monthly health insurance costs.
The most important thing, should you decide to request a refund of your account, is that you have a clear understanding of your options and any related implications. Some things to be aware of;
- Taxes may need to be withheld from your refund, depending upon how you decide to receive the money
-You may need to report your refund on your on taxes as income and pay the required income taxes at tax time
- Should you rejoin or start contributing to the ASRS again after you've refunded your account, you’ll basically be restarting your “retirement clock” back to zero, having forfeited any previously earned service credit when you refunded. This also means not being grandfathered into any rule changes that may have occurred since you initially joined.
We sometimes see teachers requesting refunds at the end of each school year as a way to receive money for the summer. For some, this leads to being caught off guard at the end of their career when they believe they’ve reached retirement age yet don’t meet the eligibility criteria to retire, as they no longer have any substantial amount of accrued service.
So, if you’re asking yourself, “Should I refund my account?” make sure to do your due diligence. Visit the Refund page of AzASRS.gov for additional information, analyze the information in your secure myASRS account, and if questions still remain, seek us out - our trained staff is here to help guide you to the best decision for you.
Written by Nathaniel Brengle, Strategic Communications
Updated 5/2023
