Yes, you can borrow from your PERS (Public Employees Retirement System) retirement account, but the specifics depend on the state in which you’re employed, the type of PERS plan you have, and the rules governing that plan. Generally, PERS retirement plans are designed to provide income after retirement, so they have restrictions on accessing funds early. However, here’s an overview of what might be possible:
Options for Accessing PERS Funds
- Hardship Withdrawals
- Eligibility: Some PERS plans may allow hardship withdrawals under specific circumstances, such as severe financial hardship, medical emergencies, or disability. These withdrawals are typically only allowed under strict conditions, and you may need to provide documentation to prove your hardship.
- Tax Implications: Hardship withdrawals are usually subject to income tax, and if you are under the age of 59½, you may also incur a 10% early withdrawal penalty. Additionally, the withdrawal might affect your retirement benefits since it reduces the amount saved in your account.
- Loans
- Loan Availability: Some PERS plans allow participants to take out loans against their retirement accounts. Not all PERS plans offer this option, so you’ll need to check with your specific plan provider.
- Loan Terms: If available, the loan typically needs to be repaid with interest within a certain period (usually five years), and the loan amount is limited to a percentage of your account balance. Failing to repay the loan could result in it being treated as a distribution, subject to taxes and penalties.
- Early Retirement or Separation
- Withdrawal After Separation: If you leave your job or retire early, you may be able to withdraw funds from your PERS account. This can often be done as a lump sum or as a series of payments. However, early withdrawals (before age 59½) may be subject to taxes and penalties unless you meet certain exceptions.
- Rollover Options: After separation, you might have the option to roll over your PERS funds into an IRA or another qualified retirement plan, which may offer different withdrawal options or allow loans.
- Refund of Contributions
- Refund Policy: Some PERS plans allow you to take a refund of your contributions if you leave public employment before retirement age. However, this usually means you forfeit your right to future retirement benefits. The refund is typically subject to taxes and possibly early withdrawal penalties.
Considerations Before Borrowing from PERS
- Impact on Retirement: Withdrawing or borrowing from your retirement account can significantly reduce your retirement savings and the benefits you’ll receive when you retire. It’s important to carefully consider whether the short-term financial relief is worth the long-term impact on your retirement security.
- Alternative Options: Before borrowing from your PERS retirement, consider other options such as personal loans, home equity loans, or other financial resources that might offer better terms and lower long-term costs.
- Consult with a Financial Advisor: Given the complexity and potential consequences of borrowing from your retirement account, it’s wise to consult with a financial advisor or retirement specialist who can help you understand your options and the implications for your future.
Conclusion
Borrowing from or withdrawing funds from your PERS retirement account is possible in certain circumstances, but it’s typically restricted and comes with significant tax implications and potential penalties. It’s essential to thoroughly understand the rules of your specific PERS plan and carefully weigh the short-term benefits against the long-term impact on your retirement savings.