NC TSERS Retirement Mistakes to Avoid: 7 Errors That Cost Retirees Money

1. Choosing a Payout Option Without Understanding It Is Permanent

Under N.C. Gen. Stat. § 135-5, your payout option election — Maximum Allowance, Option 2, 3, 4, 6-2, or 6-3 — becomes final when RSD issues your first monthly benefit payment (normally the 25th of your retirement month when forms are processed on time). Once issued, you generally cannot change it, even if your circumstances change dramatically. A retiree under Option 2, 3, 6-2, or 6-3 who remarries may substitute a new spouse as beneficiary if statutory requirements are met.

A retiree who selects the Maximum Allowance for the highest monthly payment and whose spouse later loses their own income source has no mechanism to switch to a joint-and-survivor option. The window for changing your election closes before the first check, and it does not reopen.

Before you submit Form 6E, request benefit estimates for at least three options so you can compare the monthly amounts and survivor implications side by side.

2. Missing the Service Credit Purchase Deadline

All service credit purchases — withdrawn service, military time, out-of-state employment — must be paid in full before your effective retirement date. Not "in progress." Not "nearly complete." Paid in full and processed.

Members who start the purchase process six weeks before retirement frequently discover that the cost calculation, payment arrangement, and processing cannot be completed in time. Begin the inquiry 12 months out and finalize payment at least 60 days before your retirement date.

3. Assuming You Qualify for Free Retiree Health Coverage

Your State Health Plan eligibility and premium level depend entirely on your initial hire date, not your years of service alone. Members hired before October 1, 2006 qualify for fully state-paid retiree health coverage with just five years of service. Members hired between October 2006 and December 2020 need 20 years for the same benefit — and those hired on or after January 1, 2021 receive no retiree health coverage at all, regardless of service length.

Discovering this distinction at retirement, rather than years earlier when you could have planned accordingly, is one of the most financially disruptive surprises TSERS members face.

4. Violating the 6-Month Return-to-Work Separation

Retired teachers who agree to substitute teach the semester after they retire — or retirees who pick up contract work for a state agency within six months — risk having their entire retirement invalidated. The Retirement Systems Division enforces the six-month separation strictly: violating it requires repayment of every pension check received and cancellation of your retirement.

The separation applies to paid or contractual work for any TSERS-participating employer, including part-time or temporary arrangements.

5. Confusing WEP/GPO Repeal with Option 4 Changes

The Social Security Fairness Act, signed January 5, 2025, repealed the federal Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Some TSERS members mistakenly believe this repeal eliminated the reduction built into Option 4 (Social Security Leveling).

It did not. Option 4's reduction at age 62 is an internal TSERS benefit redistribution — it shifts pension income from before age 62 to after — and has nothing to do with federal WEP or GPO. Retiring under Option 4 still means your TSERS check drops permanently at age 62, with no survivor benefit. The repeal changes none of that.

6. Not Filing for Social Security After the WEP/GPO Repeal

On the flip side, TSERS members or their spouses who never filed for Social Security spousal or survivor benefits because WEP or GPO would have eliminated them should file now. The repeal is retroactive to benefits payable from January 2024, but the SSA does not automatically enroll people who never applied. You must file a new claim to receive benefits you previously skipped.

7. Neglecting the Contributory Death Benefit Election

The $10,000 retiree contributory death benefit must be elected within 60 days of your effective retirement date. If you miss that window, contact RSD rather than assuming you can enroll later. Premiums are based on age at retirement and deducted from your pension check. For retirees who chose the Maximum Allowance (which provides no ongoing survivor benefit), it may be the only TSERS-funded payment your family receives.

The 60-day window falls during a period when new retirees are managing multiple transitions — health plan enrollment, first-check paperwork, and household budget adjustments. Form 333BEN is easy to overlook.

The NC TSERS Retirement Guide walks through each of these decision points in sequence, with the deadlines and forms mapped to a countdown calendar so nothing falls through the cracks.

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