Tag Archives: retirement planning

Women and Retirement

Saving for retirement is important for everyone, but it’s especially important for women. Women tend to live longer than men, but they may not spend as many years in the workforce and they may not earn as much. Because of this, women tend to lag behind men when it comes to retirement savings.

On average, a 65-year-old man can expect to live to be about 83, while a 65-year-old woman can expect to live to nearly 86, according to data from the Social Security Administration. That means a woman’s savings need to stretch that much further. But in a survey released in March by the Transamerica Center for Retirement Studies, women reported far lower retirement savings than men. The median savings for women was only $34,000, compared with $115,000 for men.

Women and Retirement

The survey also found that the percentage of women who had no retirement savings was higher than the percentage for men. Women also tended to be less confident about their ability to retire in comfort, according to the survey of over 4,000 U.S. workers.

Here are some things you can do to make sure you’re on track:

  • Start saving for retirement, if you haven’t already. Make regular, consistent additions to your savings.
  • If you’re already saving, increase the amount you save. Even a small increase will make a difference over time. (Try adding 1 percent of your salary, then bump it up next time you get a raise.)
  • Educate yourself about retirement savings and investments.
  • Learn more about your NYSLRS retirement benefits. There is a lot of good information in your Member Annual Statement. You may also wish to read the NYSLRS publication How Do I Prepare to Retire?
  • Learn more about your Social Security
  • If you are close to retirement, make a retirement budget.
  • Talk to a financial adviser.
  • Make a retirement plan. Write it down. And revisit it periodically.

A defined benefit plan, such as the NYSLRS retirement benefit, provides a monthly pension payment for life. But, savings are still important as a supplement to a pension and Social Security, a hedge against inflation and a resource in an emergency.

 

Choosing Your Pension Payment Option

When you retire from NYSLRS, you’ll need to decide how you want to receive your pension benefit.

You’ll have several options. All of them provide a monthly benefit for life. Some also provide a limited benefit for one or more beneficiaries after you die. Others let you pass on a monthly lifetime pension to a single beneficiary. Each option pays a different amount, depending on your age at retirement, your beneficiary’s age and other factors.

Pension Payment Option

That’s a lot to think about, so let’s make this clearer with an example. Meet Jane. Jane plans to retire at age 60, and she has a husband, a granddaughter and a grandson who are financially dependent on her. First, Jane needs to decide whether she wants to leave a benefit to someone after she dies. She does.

That eliminates the Single-Life Allowance option. While it pays the highest monthly benefit, all payments stop when you die.

Jane considers naming her grandchildren as beneficiaries to help pay for their college education.

The Five Year Certain and Ten Year Certain options don’t reduce her pension much, and they allow her to name more than one beneficiary. If Jane dies within five or ten years of retirement, her grandkids would split her normal benefit amount for the rest of that period.

However, the Five and Ten Year options wouldn’t be lifetime benefits. Since her husband doesn’t have his own pension, she’ll leave him her pension and look into a tax-deferred college savings plan for her grandkids instead.

There are a few options that leave a lifetime benefit:

The Joint Allowance — Full and Joint Allowance — Half options continue paying all or half of the retiree’s normal benefit amount to the beneficiary for life.

The Pop-Up/Joint Allowance — Full and Pop-Up/Joint Allowance — Half options also continue the retiree’s normal benefit. They reduce the pension a little more, but they have an advantage: If a retiree outlives his or her beneficiary, the retiree’s monthly payment will “pop up” to the maximum payable under the Single-Life Allowance option.

As you plan for your own retirement, you may also want to consider questions, like:

  • Do you qualify for a death benefit?
  • Do you have life insurance?
  • Do you have a mortgage or unpaid loans that will have to be paid if you die?

These and other factors can significantly impact your retirement planning.

To find out more about pension payment options, check your retirement plan booklet on our Publications page. You can also try our Benefit Calculator, which allows most members to estimate their benefits under the different payment options. For tips on developing a financial strategy that works for you, take a look through Straight Talk about Financial Planning for Your Retirement.

Debt and Retirement

If you’re planning to retire in the near future, it’s a good idea to take inventory of the debts you owe. Why start your next life chapter burdened with debt and interest payments?

A high priority should be any loans you have taken from NYSLRS. You cannot pay off your loan after you retire. If you have an outstanding balance when you retire, it will permanently reduce your pension. For example, if a 60-year-old Tier 3 or 4 member of the Employees’ Retirement System retires this year owing $10,000, the annual reduction would be $560.50. And that reduction would continue even if the total reduction exceeds the amount owed. What’s more, at least part of the balance would be subject to federal taxes. Learn more about paying of a NYSLRS loan.
Debt and Retirement — How a NYSLRS Loan could affect your retirement
Another priority is paying off credit cards. The average American household with credit card debt owes more than $16,000 and pays about $1,300 a year in interest, according to a recent analysis of federal data.

Fortunately, getting a handle on your credit card debt has gotten easier. A recent federal law requires credit card statements to carry a “Minimum Payment Warning.” This tells you how long it will take, and how much it will cost, to pay off your balance if you only make minimum payments. It also tells you how much you need to pay each month to pay off the balance in three years.

If you have more than one credit card balance, most financial advisers recommend you pay as much as you can on the card with the highest interest. Pay at least the minimum, preferably more, on lower-interest cards until the high-interest card is paid off. But some advisers say it might be better to pay off the card with the smallest balance first. That will give you a sense of accomplishment, which could make the process seem less daunting.

Mortgage balances make up two-thirds of the $12.6 trillion in U.S. household debt. But should you strive to pay off your mortgage before you retire? Financial advisers differ on that question, so do your research to consider all the factors.

Read more about debt and retirement in our publication Straight Talk About Financial Planning For Your Retirement.

Spending Changes in Retirement

Just like starting your first job, getting married or having kids, retirement will change your life. Some changes are small, like sleeping in or shopping during regular business hours. Others, however, are significant and worth examining ahead of time…like how much you’ll spend each month or each year.

An Employee Benefit Research Institute study offers some good news for prospective retirees. Household spending generally drops at the beginning of retirement — by 5.5 percent in the first two years, and by 12.5 percent in the third and fourth years. On the other hand, a significant portion of households — nearly 46 percent — actually spend more in the first two years of retirement.

So, have you considered how you’ll spend money once you retire?

Prepare a Post-Retirement Budget

Like a fiduciary choir, financial advisors all sing the same refrain: Start young; save and invest regularly to meet your financial goals. If you do, making the switch from saving to spending in retirement can be easy. But, in order to plan, you need a budget.

The first step toward a post-retirement budget is a review of what you spend now. For a few months, track how you spend your money. Don’t forget to include periodic costs, like car insurance payments or property taxes. By looking at your current spending patterns, you can get an idea of how you’ll spend money come retirement.

Then, consider your current monthly income, and estimate your post-retirement income. If your post-retirement income is less than your current income, you might want to plan to adjust your expenses or even consider changing your retirement plans.

We have monthly expense and income worksheets to help with this exercise. You can print them out and start planning ahead for post-retirement spending.

Monthly budgeting worksheets (PDF)

Monthly Worksheets (PDF)

For those of you who carry smart phones, Forbes put together a list of popular apps for tracking your daily spending. All of them are free, though some do sell extra features. Many of them can automatically pull in information from your bank and credit card accounts, but if you’d rather avoid that exposure or if you use cash regularly, we recommend you try an app that lets users enter transactions manually.

Filing Your Application for Retirement

You’ve carefully planned your retirement, received your benefits estimate and are ready to take the big step. But before you can start receiving a pension, you’ll need to complete and submit your Application for Service Retirement (RS6037). You can also get a copy of the form from your employer or by contacting our Call Center.

Timing is important. We must have your application on file at least 15 days, but not more than 90 days, before your retirement date. (The 15-day rule does not apply if you are over 70 or left the public payroll before age 55.)

Be sure to list all of you public employment on the form. If you’ve ever been a member of another public retirement system in New York State, you’ll need to note that as well. Because your application is a legal document, you must sign it in the presence of a notary public. Many members make an appointment at a Consultation Site to file their applications. Our information representatives can notarize your application, help you with your paperwork and answer any questions.

Filing for Retirement

If you don’t wish to file in person, you can send your application by mail. Mailing the application “Certified Mail — Return Receipt Requested” will help you track this important document. Certified mail is also a good idea if you are close to a filing deadline because we consider the day it was mailed as the filing date. The mailing address is:

NYSLRS
110 State Street
Albany, NY 12244-0001

At the same time you submit your application you can also file a W-4P, so federal taxes can be withheld from your payments, and a Direct Deposit Enrollment Application, so your pension can be deposited directly into your bank account. If you’ve had a recent pension estimate, you can submit a payment option election form along with your retirement application. You should also submit a photocopy of proof of your date of birth

For more information, read our booklet “Life Changes: How to Prepare to Retire” or contact us.

Power of Attorney

Power of AttorneyA Power of Attorney document (POA) lets a friend or family member you trust make decisions for you in your legal, financial and business dealings. It can be a helpful tool in case of emergency, hospitalization or unexpected admission to a nursing home.

Usually, NYSLRS can’t release benefit information to anyone without your say-so — even close family members. However, once we have a copy on record, we can discuss your pension with an agent you choose in your POA.

On the other hand, you need to understand the importance and considerable impact of a POA. Once you sign one, your agent can do more than request information; they can change your address with NYSLRS or even adjust your tax withholding — all without asking you. Some POAs include something called a statutory gift rider. If yours does, your agent will also be able to redirect your deposits to a joint bank account. (We can’t ever deposit money into an account that does not have your name on it.)

If you’re thinking about a POA, NYSLRS offers a form that combines the New York State statutory POA with a gift rider. This form meets all of New York State’s legal requirements, and it’s limited to retirement benefit transactions. For example, it won’t serve as a healthcare proxy. You can find the form at www.osc.state.ny.us/retire/forms/poa.pdf.

It’s important to consult an attorney before you execute a power of attorney document or anything similar.

How Much Will My Pension Be?

Estimate Your Pension

For anyone thinking about retirement, one big question looms: How much money will I have to live on after I stop working? Your NYSLRS pension is a lifetime benefit. Having a good idea of what that monthly amount will be is essential to effective retirement planning. Fortunately, we offer tools to help you estimate your future pension.

Most members* can use our Benefit Projection Calculator to estimate their pension. You can use this calculator even if your planned retirement date is a long way off. The calculator provides estimates based on information you enter. By changing each variable (date of retirement, average salary, beneficiary information), you can see the impact it would have on your pension benefit.
how to estimate pension infographic
If you are a vested member who has enough NYSLRS service to be eligible for a pension, you can request a benefit projection by calling our automated information line at 1-866-805-0990 (518-474-7736 in the Albany, New York area). This service is available 24 hours a day, seven days a week.

If you are nearing retirement eligibility and you aren’t certain that you have credit for all of your NYSLRS-eligible employment, complete and submit a Request for Estimate (RS6030) form. If you are a member of the Employees’ Retirement System (ERS), you may use this form if you will be eligible to retire within five years. Members of the Police and Fire Retirement System (PFRS) can submit this form within 18 months of their retirement eligibility date.

As part of your retirement planning process, you may also want to check on your Social Security benefits.

*At this time, you cannot use this calculator if you are in ERS Tier 5 or 6; PFRS Tier 3, 5 or 6; or certain special plans.

Welcome New Members

Welcome to new members of the New York State and Local Retirement System (NYSLRS).

NYSLRS is here to help you plan for a financially secure retirement. Your retirement may be far in the future, but decisions you make now will have a big impact on your later years. Here are a few things you should know:

How Pensions Work

A NYSLRS pension is a defined benefit plan. Under this type of plan, once you are eligible for a pension and apply for retirement, you will receive a monthly payment for your lifetime. Your pension benefits are determined by a preset formula set by law. However, many employees in the United States, particularly in the private sector, are enrolled in 401(k)-style plans. The ultimate value of a 401(k) plan is based on the contributions made and investment returns. While 401(k) plans and other individual retirement accounts are a way to supplement your pension and Social Security payments, they do not provide the same level of security as defined benefit plans. Unlike your pension, these plans do not guarantee a lifetime benefit. Learn more about how pensions work.

New Members Checklist

Service Credit

Your NYSLRS pension will be based on factors such as your tier, retirement plan, age at retirement, final average salary, and service credit. One year of full-time employment with a participating employer is equal to a one year of service credit. Part-time employment is prorated. You may also be able to buy service credit for previous public employment or military service, which in most cases would increase your pension.

Start Saving Now

Because having a defined benefit pension plan is only one part of building a financially secure future, it’s essential that you save additional money for retirement. State workers and employees of participating local governments can take advantage of the New York State Deferred Compensation Plan. You can start by having as little as $10 deducted from each paycheck. You may choose how your money will be invested from a variety of options. Because of how compound interest works, the earlier you start saving, the better off you’ll be.

More Information

You’ll find more information in our booklet Membership in a Nutshell. We also publish booklets about specific retirement plans. If you know which system you’re in (Employees’ Retirement System or Police and Fire Retirement System) and your tier, you should be able to find your plan. If you are not sure what plan you’re in, ask your employer.

Overtime Limits for Tier 5 and 6 Members

The exact formula used in calculating your NYSLRS pension varies by tier and plan, but your credited service and final average salary (FAS) are the core variables. You earn service credit for paid service with participating employers and you also may claim it for some previous public service. FAS is the average wage you earned during the time period when your earnings were highest (36 consecutive months for Tier 5 and 60 consecutive months for Tier 6).

Your FAS can include overtime pay that you earned during the FAS period. However, for Tier 5 and 6 members, there are limits to how much overtime can be used to calculate your pension.

Members and employers aren’t required to make contributions on overtime pay above the limit, and your employer shouldn’t report overtime above the ceiling to us. While you can earn overtime beyond the limit, anything over will not count toward your FAS or your retirement benefit.

Tier 5 Overtime Limits

For Tier 5 Employees’ Retirement System (ERS) members, the limit changes each calendar year. The overtime ceiling for Tier 5 increases each calendar year by 3 percent. This year, the overtime ceiling for Tier 5 ERS members is $18,448.11. In 2018, it will be $19,001.55. For Police and Fire Retirement System (PFRS) members, the overtime limit is 15 percent of your regular earnings each calendar year.

Tier 5 & 6 Overtime Limits

Tier 6 Overtime Limits

For Tier 6 ERS members, the cap follows the fiscal year (April 1 through March 31), not the calendar year. For 2016-2017, the limit is $15,721. Come April that will increase to $16,048. The limit is adjusted for inflation based on the annual Consumer Price Index (CPI). The overtime ceiling for Tier 6 PFRS members is 15 percent of your regular earnings each calendar year.

Find more information about the overtime limit, FAS and retirement calculations in your plan booklet, available on our Publications page.