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Financial Literacy and Retirement

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April is National Financial Literacy Month, a time dedicated to helping people make informed financial decisions and manage money effectively. Financial literacy means understanding and using skills such as budgeting, investing and managing your personal finances.  

Greater financial literacy generally translates into greater financial well-being, according to a recent report from the TIAA Institute-GFLEC Personal Finance Index. TIAA’s research also finds a connection between financial literacy and saving for retirement.

Financial Literacy and Retirement

Financial Literacy and Planning for Retirement

Increase your financial literacy and make a good plan for retirement by understanding your NYSLRS benefits, your other sources of retirement income and your current financial situation. Once you know where you stand, you’ll be in a better position to plan.

Understand Your NYSLRS Benefits

As a NYSLRS member, you are enrolled in a defined benefit plan, also known as a traditional pension plan. If you are vested and retire from NYSLRS, you will receive a monthly pension payment for the rest of your life. Your pension will be calculated using a formula based on your earnings and years of service, your retirement plan, and your tier. 

Find your retirement plan publication for comprehensive information about the benefits you are entitled to receive as a member of the Employees’ Retirement System (ERS) or the Police and Fire Retirement System (PFRS).

Depending on your tier and retirement plan, certain membership milestones will affect how your pension is calculated and how much you’ll receive at retirement. Read our milestones blog posts for general information about the retirement plans that cover most NYSLRS members:

Consider Other Sources of Retirement Income

Your pension will provide you with monthly payments for the rest of your life. But there is more to a financially secure retirement than having a pension. Understanding your potential sources of income will help you plan for your future and boost your retirement confidence. Think of retirement security as a three-legged stool. Each leg is a source of income to help support you when your working days are done.

The formula for a financially secure retirement

Retirement savings can be an important financial asset when you retire. Savings can provide money for you to travel, continue your education, pursue a hobby or start a business. The money you set aside can also be a resource in case of an emergency, act as a hedge against inflation and boost your retirement confidence.

Evaluate Your Current Financial Situation

Estimate Your Retirement Income

An estimate of your NYSLRS pension benefit is essential for effective retirement planning. Most members can create their own estimate in minutes using Retirement Online. Your estimate will be based on the most up-to-date account information we have on file for you. You can enter different retirement dates to see how those choices would affect your benefit.

There are also a variety of online calculators that can help you estimate the retirement income you might expect from Social Security or personal retirement savings.

Create a Budget

Use our Monthly Income & Expenses Worksheets to help you track your current spending habits and project your future needs. Remember to account for non-monthly expenses, such as car insurance, property taxes and school taxes.

Pay Down Your Debt

If you’re planning to retire soon, it’s a good idea to take inventory of any debt you owe. Debt is not necessarily bad but paying it down can give you more flexibility to enjoy the type of retirement you want.

Debt and Retirement

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If you’re planning to retire soon, it’s a good idea to take inventory of any debt you owe. Paying down your debt can give you flexibility to enjoy the type of retirement you want.

NYSLRS Loan Debt

If you have an outstanding NYSLRS loan balance when you retire, it will reduce your pension. The amount of your reduction is based on:

  • Your retirement system — Employees’ Retirement System (ERS) or Police and Fire Retirement System (PFRS);
  • Your tier;
  • Your age at retirement; and
  • Whether you retire with a service retirement benefit or a disability retirement benefit.
Debt and Retirement - How a NYLSRS Loan Balance Could Affect Your Pension

The pension reduction does not go toward repaying the outstanding loan balance — it’s a permanent reduction. And, at least part of the loan balance at retirement will be subject to federal income taxes.

When you apply to retire using Retirement Online and have an outstanding NYSLRS loan balance, the pension reduction amounts are provided to you. They are also listed on the loan applications on our Forms page. If you are nearing retirement, be sure to check your loan balance. If you are not on track to repay your loan before you retire, you can increase your loan payments, make additional lump sum payments or both (see the Change Your Payroll Deductions or Make Lump Sum Payments section of our Loans page.)

Although ERS members may repay their loan after retiring, they would have to pay the full balance that was due at retirement in a single lump sum payment. Then, going forward, the pension would be increased to the amount it would have been without the loan reduction. However, it would not be increased retroactively back to the date of retirement.

Other Debt to Check

Credit Cards

Another priority is paying off credit cards. Credit card statements carry a minimum payment warning that tells you how long it will take, and how much it will cost, to pay off your balance making only minimum payments.

If you have more than one credit card balance, many financial advisors recommend you pay as much as you can on the card with the highest interest, while making at least the minimum payments on lower-interest cards. Once you’ve paid off the high-interest card, focus on the one with the next-highest rate, and so on. Other advisors say it might be better to pay off the card with the smallest balance first. The idea is to gain a sense of accomplishment, and make the process seem less daunting.

Mortgages

Should you try to pay off your mortgage before you retire? Advice varies on that question. It would eliminate a major expenditure and let you spend your retirement income on other things. On the other hand, if your mortgage interest rate is relatively low, you may want to focus on paying off other high-interest debt or boosting your retirement savings. What works best for you will depend on your situation.