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Educator Investments

We're in the process of getting our first house, and as we get closer and closer to crunch time, we have to secure the money for our down payment. As we are going through this process, I'm learning that home buying comes with its own particular language! It's crazy. It feels like we're taking a mortgage literacy course because we're hit with a new word every day!

Anyway, most people miss out on a home because they don't have the funds for the down payment. I'm looking at the few resources that I have to pull from, and since I'm an educator, I've been asked to look at my retirement funds as a source for the down payment.

I live in Georgia. Georgia educators use the Teacher's Retirement System (TRS), and you can learn more about it here. Here's the good part, "A defined benefit retirement plan (401A) relieves its members of the burden of making investment decisions and assuming the risk associated with those decisions. TRS assumes this risk for its members. Therefore, the retirement benefit offered by TRS is secure." (2017).

Sounds good right! I've been teaching for seven years and I've never questioned the wisdom of this plan until recently. I like that it's not affected by the stock market! That's awesome. It's consistent. It's dependable. But can I use this money for this house?! Can I make a withdrawal from it?  Here's the rub, "While you are employed in a TRS covered position, as stated in Georgia law, you cannot make withdrawals or borrow funds from your account. If you terminate your TRS covered employment you may apply for a refund of contributions and interest. However, you are not eligible for a refund after you accept other TRS covered employment." (2017).

Not cool right?! I can't use my hard earned money to help finance my first house?! It sux!  😒 . I have to quit teaching or cancel my TRS contributions, withdraw the funds and get hit with a 20% tax???!!! It's easy to build a nice little cushion with this program too! So I've learned that I can avoid the penalty and rollover this account into a Traditional IRA or a Roth IRA, and then use up to $10,000 towards my down payment,

Ok. Sounds like we're on the right track right? So now the question is, which one should I use? The Traditional IRA or the Roth IRA? Also, which company should I work with? Should I sit down with my banks (Bank of America, SunTrust, Delta Credit Union, Chase, etc...) or should I see the folks over at Charles Swab? Or should I cut out the middle-man and make the plunge at E-trade? Lol. Too many options.

Schools don't do a very good job of teaching people how to invest. Especially, for a person of color, we don't typically have these conversations with our families, with our friends, or even with our colleagues. It seems to be an acquired language spoken by people who are much more proficient at using it than we are. It feels like I've arrived at the party too late, but better late than never right?

I read a great article from Bankrate about whether or not I should use retirement funds. I read another great article here about the differences between a Traditional and Roth IRA.

Doing some more digging, this is a good article from NerdWallet highlighting the pros and cons of each investment company. So, I think I'm going to go with TD Ameritrade. I really like the educational resources they have available so you can't go wrong with a company that wants to educate its' customers. I'll give em a call and we'll see how things go from here!


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