Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Comparison tables scroll horizontally on smaller screens.
Updated August 3, 2026. Quick answer: taking a refund of your contributions when you leave public employment gets you your own money back — and in most systems it cancels every year of service you earned, not just the years you were paid for. If you are vested, or might ever return, leaving the money in is usually the better decision.
What a refund actually returns
A refund pays out your contributions. It does not pay out the employer’s contributions, which in most systems are the larger share and stay with the plan. So the headline number is smaller than the amount that was going in on your behalf, often by a lot.
Interest is where systems differ sharply, and it is not always favourable:
| System | What a refund pays | The catch |
|---|---|---|
| STRS Ohio | member contributions, per statute | the refund “cancels the member’s total service credit” — all of it, not just the refunded period (ORC 3307.56(C)) |
| TRS Illinois | contributions with no interest | years of inflation borne entirely by you |
The Ohio provision is the one that catches people. It is easy to assume a refund unwinds the years you are paid for and leaves the rest intact. It does not. A member with fifteen years who refunds a short early period can find the whole fifteen cancelled, and with it any path to a vested benefit.
Coordinate this with the rest of your retirement plan
A pension election is usually a one-time choice you cannot revisit, and an adviser can weigh it against your other income, your spouse’s position and how long the money has to last, though that does not replace the numbers in your own plan documents.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here. You stay on this page.
What happens when you press the button
It asks about nine questions (age, investable assets, location), then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button. Submitting the form does not guarantee an adviser or a match. This matching form is not tax or legal advice.
The decision, in the order it should be made
- Are you vested? If yes, a refund trades a lifetime benefit for a cash sum that excludes the employer’s money. That trade is rarely good, and it is irreversible in the systems that cancel service.
- Might you ever return to covered employment? Public-sector careers are interrupted more often than people expect. Reinstating cancelled service later normally means buying it back at actuarial cost — far more than the refund paid you.
- Do you need the money now? A genuine need is a genuine reason. But compare it against what the refund costs you, not against zero.
The tax point people miss
A refund paid directly to you is generally taxable income, and if you are under the relevant age it may carry an early-distribution penalty as well. Rolling it to an IRA instead preserves the tax deferral. The refund cheque is not the amount you keep. Your own system’s refund paperwork states its withholding and rollover treatment, and that is the document to read rather than a general rule.
When a refund is the right call
It usually is when you are well short of vesting, have left the sector for good, and the sum is small enough that leaving it sitting for decades against an uncertain future benefit serves no one. In that case the money is genuinely yours and there is no lifetime benefit being given up.
What makes it a bad decision is doing it while vested, or while there is any real chance of returning — and the systems that cancel all service make that mistake permanent.
Related: buying service credit back · what buying it back would cost.
General information drawn from IRS, Medicare, HUD and state statute and regulation, not legal, tax or financial advice. Continuing-care law is state law and differs materially between states; every figure here is year-labelled and every source named. Powers of attorney, guardianship and trusts are governed by STATE law and differ change, and interest rates published by the IRS change every month – never rely on a rate quoted on any page, including this one. We are not a law firm or a tax adviser, and this is not legal or tax advice.