Thinking of retiring? 3 things Illinois teachers need to know

In the fall throughout the Chicagoland area, there are multiple meetings held by the state pension system. Different members of the pension staff are presenters, so I try to attend as many meetings as I can to continue to learn the nuances of the system and their individual knowledge.

This year, I attended three meetings that lasted about an hour, and came away with three important additions to my knowledge that I thought I would pass on.

Photo credit: Chris Potter (Flickr)

1. As a retiring teacher, you will be receiving multiple refunds from the pension system:

–       If you don’t retire using the Early Retirement Option (ERO), then you get a refund of all your contributions. This amount is 0.4% of your total amount of pay throughout your career. If you have earned $2,000,000 throughout your career (which is not as far fetched as it may sound), then this refund will be $8,000.

–       If you paid to upgrade your 2.2 factor on your pension, but didn’t need to because you worked enough to have those years forgiven, then this will be refunded to you.

–       If you are single with no dependents, you can receive a refund of your survivor benefit contributions. This refund is 1% of your lifetime earnings. So for our example above with the $2,000,000 in earnings, this would be $20,000.

The one thing to realize about all of these refunds is that they can automatically be rolled to a 403(b) or IRA – without counting against your annual contribution limit. With some of these refunds being ten of thousands of dollars, this can be a substantial addition to current retirement funds.


2. You can leave teaching prior to full eligibility age, and avoid receiving a reduced pension

This one seemed obvious but it didn’t click until I heard it. If you are teaching and retire before you are eligible for your pension, your pension will be reduced by 6% per year that you were short of becoming eligible.

However, should you leave teaching and not retire from teaching, you will not be penalized. If you “leave” at 58 but then “retire” at age 60, then you will receive a lower pension than you would have done working until 60, but it won’t be reduced by 6% per year than if you would retired at age 58.

However, if you retire at 58, you will be able to receive your pension at 58 versus waiting until 60.

Making this distinction should you want to terminate your employment will be the difference of several thousand dollars. If you want to leave at 58 and can afford not to collect your pension until age 60, this would be the preferred approach.


3. If you enroll in TRIP (Teacher’s Retirement Insurance program) and then terminate coverage, you are not entitled to coverage again

This one came as a shock as it could happen in a variety of situations. If you elect to take TRIP for health insurance coverage, but then your spouse changes jobs and has a better insurance plan that you join, you can drop TRIP in favor of that plan, but you cannot join TRIP again in your lifetime.

For teachers that are retiring, evaluating all of your insurance options is very important. With the Affordable Care Act (“Obamacare”) coming into law and the addition of the Medicare Advantage plan for all TRIP members over age 65, there are a lot of plans to compare to make sure you pick the right one.  We’ll be covering the Medicare Advantage plan in another post.

With dropping out of the TRIP plan being irrevocable, it is imperative that this decision is considered knowing all of the outcomes and possibilities.


Retiring as a teacher includes a lot of decision-making. Making the wrong choice could cost you money or give you a service that is not the best for you. We’d be happy to help you avoid those things.