How to Borrow From Your Retirement Account in South Carolina

South Carolina public employees are eligible for the Public Employee Benefit Authority (PEBA) retirement system. S.C. PEBA is similar to retirement systems in other states where you earn credits during your working years that determine your monthly retirement benefit. Sometimes, unexpected life events might leave you in a bind, and you might be wondering if you can borrow from your S.C. PEBA account. Rules for borrowing from your retirement account differ by state. Let’s explore the rules for borrowing from your retirement account in South Carolina.

Understanding the S.C. Retirement System

The S.C. retirement system allows you to contribute to the system and receive benefits if you are an employee of a state agency, public school district, charter school district, employed in public higher education or other subdivisions of the S.C. state government. If you are in S.C., PEBA allows you to receive your full retirement benefit at age ​65​ or older. In some cases, the S.C. retirement system allows you to retire at age ​55​ or ​60​ with ​25​ years of service. If you decide to take this option, you will receive a reduced benefit.

Your eligibility for the South Carolina Retirement System (SRCS) depends on your employment class. Under the system, you are either a Class Two or Class Three member, depending on whether you entered the system before or after July 1, 2012. These classes have different rules regarding the amount of benefits you can receive and when you can begin receiving them.

S.C. State Retirement Calculator

You are eligible to contribute up to ​nine​ percent of your gross income tax-deferred. Your contributions earn ​four​ percent interest compounded annually until you reach retirement and begin withdrawals. If you want to know how much you will have at retirement, the S.C. state retirement calculator is based on ​1.82​ percent of your average final compensation. This amount is multiplied by your years of service.

You can find an unofficial estimate of your retirement benefits with this S.C. retirement calculator.

Borrowing From Retirement in S.C.

It is never a good idea to borrow from your retirement account, and you should always look for other ways to cover debt. This option should only be used as a last resort, regardless of the type of retirement savings account.

The laws regarding state retirement accounts are different from the laws that govern private sector accounts. Each state makes its own rules. Some states allow you to borrow money from your retirement account, like New York and West Virginia. Those that allow you to borrow from retirement often have strict limits on how much you can borrow. A majority of the states do not allow you to borrow against your retirement savings, and South Carolina is one of them.

The prohibition against borrowing from your S.C. PEBA account includes your contributions, the state’s contributions and interest earned. This even applies in the case of hardship. You cannot use the money in your state retirement account as collateral for a loan either. These funds are safe from seizure by a creditor.

These rules are in place so that you do not risk your retirement for a short-term crisis. If you are facing financial hardship, you should talk to your employer to see if there are any other resources available to resolve your issues. Regardless of whether you are a state employee or a private sector employee, borrowing from your retirement comes with big penalties.

If you need more information about PEBA, South Carolina has an excellent website that you can use as a source of information. You can access your account or find someone to answer your questions online using this portal.