Caution About Cash-Out - MyFRS

This publication is a summary of the Investment Plan termination options available to FRS employees, written in non-technical terms. It is not intended to include every program detail. Complete details can be found in Chapter 121, Florida Statutes, the rules of the State Board of Administration of Florida in Title 19, Florida Administrative Code and the Investment Plan Summary Plan Description. In case of a conflict between the information in this publication and the statutes and rules, the provisions of the statutes and rules will control. The examples used in this document may differ from your personal financial situation depending on factors such as your tax filing status, actual investment return, and account balance. Caution About Cash-Out Many people

choose to cash out their retirement account and spend the money on today’s expenses. But cashing out is typically not in your best long-term interest. Here’s why: Your Investment Plan benefi t is intended to provide you with retirement income. If you spend this money now, you may not have enough money to live comfortably in retirement … not to mention the taxes and penalties you will have to pay on your distribution. Penalties And Taxes If you receive a distribution of any of your Investment Plan balance (including a rollover to another plan): • You will lose any non-vested prior FRS Pension Plan service. • If you are re-employed by an FRS employer in the future, you: • Will not be entitled to membership in the Special Risk class. • Will not be eligible to receive disability coverage. • Will not be eligible to participate in the Deferred Retirement Option Program (DROP). If you withdraw your money now, there are tax consequences. You’ll owe income taxes on your entire distribution in the year it’s paid to you, unless you roll it over into another qualifi ed plan. • A mandatory 20% will automatically be withheld, as required by federal regulations, from funds that are not directly rolled over into another tax-deferred retirement plan. • If you’re under age 59½ when you receive a distribution, you may owe an additional 10% federal tax penalty on the taxable portion of your distribution unless you meet one of the exemptions. Call 1-866-446-9377 for details. Depending on your tax bracket, an Invest- ment Plan account balance of $30,000, for example, may be worth only $21,000 if you cash it out. On the other hand, if you leave it invested until retirement age, it will be worth the full amount, plus investment earnings. Think carefully about whether it’s really worth it to potentially sacrifi ce as much as 30% or more of your retirement savings. Loss Of Earnings There’s more to consider than just taxes and penalties. If you take a distribution, you will lose the earnings you could have gained by leaving your money in the Plan. Thanks to compounding – or the snowballing effect of gaining interest on earnings – your savings can really add up. You choose… Keep your money working Cash out now Current balance $30,000 $30,000 Current balance Growth over 20 years +$86,000 * -$9,000 Pay penalties and taxes...

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