Tag Archives: deferred compensation

What to Consider When Choosing Your Retirement Date

Before you pin down a retirement date, there are several factors you should consider.

Your Retirement Date

NYSLRS has made it a lot easier for you to determine the best time to retire. Most members can now use our online pension calculator to estimate what their benefit would be at different retirement dates and ages. Just sign in to your Retirement Online account and click the “Estimate my Pension” button to get started.

choosing your retirement date

Your Health

Your current health, and your long-term health prospects, should be a factor in selecting your retirement date. If your health is poor, you may want to consider retiring earlier to give yourself more time to enjoy retirement. On the other hand, if you anticipate significant out-of-pocket health costs, working longer might give you more time to save for those costs.

If your health is good, your retirement may last longer than average. In most cases, staying on the job a little longer will increase your NYSLRS pension and provide an opportunity to increase your savings.

Your Savings

NYSLRS has always encouraged its members to save for retirement as a supplement to their NYSLRS pension and Social Security. Retirement savings are a hedge against inflation, can help in an emergency and allow you to do the things you want to do during retirement.

Having retirement savings gives you more flexibility, and if you have enough saved, that may offset any penalty if you decide to retire early. On the other hand, if you have no savings or are short of what you’d like to have, working a little longer offers a chance to save more.

State employees and some municipal employees can take advantage of the New York State Deferred Compensation Plan. If you don’t work for New York State, check with your employer to see if you are eligible. If you are not eligible, your employer may be able to direct you to an alternative retirement savings program. (The Deferred Compensation Plan is not affiliated with NYSLRS.)

In 2020, you can save up to $19,500 per year in a Deferred Compensation account, under Internal Revenue Service rules. Starting in the year you turn 50, you can save an additional catch-up amount. The age 50-plus catch-up amount for 2020 is $6,500, for a total limit of $26,000.

Your Current Job

The type of work you do is an important factor in determining when to retire. A physically demanding job can get even harder as you age, but if you’re working in an office, that’s generally not the case.

But there are other things to consider about your current job. Some members want to retire as soon as they’re eligible to go, but if your job gives you satisfaction and a sense of purpose, are you ready to walk away from it? Do you look forward to social interactions with your coworkers? Will you miss your job more than you enjoy being retired?

Your Plans for Retirement

Is retirement the end of something or the beginning of something new? Answering that question could go a long way to determining your ideal retirement date. If you have dreams of starting your own business or going mountain climbing in Spain, you may not want to delay retirement.

But if you don’t have a plan to fill the long hours of retirement, you risk becoming bored or depressed. For some, that risk is a reason to keep working. But whether you decide to retire earlier or later, having a plan for retirement can help make it a more satisfying experience.

Saving for Retirement. Is Now the Right Time?

If COVID-19 has taught us anything, it’s that dramatic change can happen quickly.

It’s clear that just about everyone’s life has been turned upside down during this pandemic. Many have been forced to rethink their plans, including plans for retirement.

In the midst of this upheaval, a clear trend has emerged: many people are spending less money, which may create an opportunity to start saving for retirement or increase your current savings.

Why Save for Retirement?

While retirees tend to spend less than they did while they were working, financial experts say you’ll still need 70 to 80 percent of your pre-retirement income to maintain your lifestyle during retirement.

NYSLRS members have the rare advantage of a well-funded, defined-benefit pension. As a NYSLRS member, once you’re vested, you’re entitled to a pension that, once you retire, will provide you with monthly payments for the rest of your life. Retirement savings can supplement your NYSLRS pension and Social Security, helping you reach that income-replacement goal.

Retirement savings can also be a hedge against inflation and a source of cash in an emergency. A healthy retirement account will give you more flexibility during retirement, helping ensure that you’ll be able to do the things you want to do. It can also provide peace of mind.

Saving for Retirement

Getting Started

For New York State employees and many other NYSLRS members, there’s an easy way to get started. If you work for a participating employer, you can join the New York State Deferred Compensation Plan. If you don’t work for New York State, check with your employer to see if you are eligible. If you are not eligible, your employer may be able to direct you to an alternative retirement savings program.

Once you sign up for Deferred Compensation, your contributions will automatically be deducted from your paycheck and deposited into your account. You can choose from a variety of investment packages or choose your own investment strategy. (The Deferred Compensation Plan is not affiliated with NYSLRS.)

Planning for an Unplanned Retirement

Retirement comes too soon for some people. Poor health, an injury, family situations, layoffs and other unforeseen circumstances could force you into an unplanned retirement.

unplanned retirement

You may already have a plan based on the date you would like to retire, but do you have a backup plan if that date comes a few years earlier than expected?

Know Your Benefits

As a NYSLRS member, you’re entitled to benefits that may help. Most vested members can begin collecting a lifetime pension as early as age 55, though your benefit may be permanently reduced if you retire before full retirement age. (Full retirement age for NYSLRS members is either 62 or 63, depending on your tier. Full retirement age for Social Security benefits depends on your year of birth.)

If you can no longer do your job because of a physical and mental condition, you may be eligible for a Social Security Disability, or a NYSLRS disability benefit if your disability is permanent.

You may also want to look into Workers’ Compensation if you are injured on the job or Unemployment Insurance if you have been laid off from a position.

Other Ways to Plan for the Unexpected

Doing your homework is important. The more you understand the potential benefits available to you, the better you can estimate your income if you are forced to retire early. Unfortunately, the numbers you come up with may not be enough when dealing with an unplanned retirement.

But one potential source of income can make a big difference: retirement savings. Your savings could help you get by until you are eligible to collect your NYSLRS pension or another retirement benefit. If you are not saving for retirement, consider starting now. And if you are saving, consider increasing your savings. It could become a lifeline if the unexpected happens.

New York State employees and some municipal employees can also save for retirement through the New York State Deferred Compensation Plan. Ask your employer if you are eligible.

For more information about the benefits offered by your NYSLRS retirement plan, visit our website to read your plan publication.

Countdown to Retirement — Eight Months Out

Once you decide to retire and begin preparing, the final months leading up to your retirement date go by quickly. Previously, we discussed the steps to take when you’re 12 months away from retirement. As we continue our Countdown to Retirement series, let’s take a look at what you should be doing eight months out.

Eight Months Out: Review Retirement Income

Some experts say that you need 80 percent of your pre-retirement income to maintain your standard of living once you stop working. There’s a good chance that your NYSLRS pension alone won’t provide that level of income. With retirement lasting 20 years, 25 years or even longer, it’s important to have a plan in place for the extra income you’ll need.

That’s why, at least eight months before your planned retirement date, you should start reviewing any other income you’ll have available. Some common sources include:

Check out our Straight Talk About Financial Planning for Your Retirement publication for monthly income and expense worksheets to help you assess your retirement finances.
Countdown to Retirement - Eight Months Out

Counting Down

Your planned retirement date is less than a year away. As the day gets closer, check out the rest of our Countdown to Retirement series for posts covering your retirement budget, what we accept as proof of your date of birth, what to do after you’ve filed your Application for Service Retirement (RS6037) and more.

Now is a Good Time to Review Your Retirement Savings

Saving for retirement? Under Internal Revenue Service (IRS) rules, you’ll be allowed to contribute more to your retirement savings account during 2019.

If you’re having part of your pay deposited directly into an employer-sponsored retirement savings account, such as New York State Deferred Compensation, you’ll be able to contribute up to $19,000 next year. That’s up from $18,500 for 2018. If you’re over 50, catch-up provisions allow you to save up to $25,000. The old limit was $24,500.

Even if you’re nowhere near the contribution limit, this is good time to review your retirement savings strategy. Are you saving enough to meet your retirement goals? Can you save more in 2019? And if you aren’t saving for retirement, now’s the best time to start.

Review Your Retirement Savings

Why Save for Retirement?

Financial experts say you’ll need 70 to 80 percent of your pre-retirement income to maintain your lifestyle during retirement. Retirement savings can supplement your NYSLRS pension and Social Security, helping you reach that goal. Retirement savings can also be a hedge against inflation and a source of cash in an emergency. A healthy retirement account will give you more flexibility during retirement, helping ensure that you’ll be able to do the things you want to do.

Getting Started

For New York State employees and many other NYSLRS members, there’s an easy way to get started. If you work for a participating employer, you can join the New York State Deferred Compensation Plan. If you are a NYSLRS member but do not work for New York State, check with your employer to see if you are eligible. (Deferred Comp is not affiliated with NYSLRS.)

Once you sign up for Deferred Comp, your contributions will automatically be deducted from your paycheck and deposited into your account. You can choose from a variety of investment packages or choose your own investment strategy.

With a tax-deferred savings plan, the impact on your paycheck will be less than the amount going into your account. (Deferred Comp even has a calculator to help you estimate the impact.)

You may also eligible for a Roth account, which lets you make contributions in after-tax dollars. In exchange for paying taxes upfront, your savings grow tax-free and you pay no taxes when you withdraw the funds in retirement. This approach may be advantageous for younger workers in lower tax brackets.

Retirement Planning Tip: Required Minimum Distributions

Required Minimum DistributionsIf you have tax-deferred retirement savings (such as certain 457(b) plans offered by NYS Deferred Comp), you will eventually have to start withdrawing that money. After you turn 70½, you’ll be subject to a federal law requiring that you withdraw a certain amount from your account each year. If you don’t make the required withdrawals, called Required Minimum Distributions (RMDs), you could face significant penalties.

RMDs are never eligible for rollover into other retirement accounts. You must take out the money and pay the taxes.

Calculating the Distribution

The RMD amount must be calculated annually. It’s based on the account’s balance at the end of the previous calendar year and the life expectancy of you and your beneficiary. Check out AARP’s Required Minimum Distribution Calculator for an easy way to determine your required distributions. Many retirement plan administrators, including the New York State Deferred Compensation Plan, will inform you of your RMD amount, but it’s your responsibility to take the required distribution.

Potential Penalty

If you don’t take the required distribution, or if you withdraw less than the required amount, you may have to pay a 50 percent tax on the amount that was not distributed. (You must report the undistributed amount on your federal tax return and file IRS Form 5329.)

The IRS may waive the penalty if you can show that your failure was due to a “reasonable error” or that you have taken steps to correct the situation. You can find information about requesting a waiver on page 8 of the Form 5329 instructions.

What Accounts Require Minimum Distributions?

Most retirement accounts you’re familiar with require these annual withdrawals:

  • 457(b) plans
  • IRAs (traditional, SEP and SIMPLE)
  • 401(k) plans
  • 403(b) plans
  • Profit-sharing plans
  • Money purchase plans

Since contributions to Roth IRAs have already been taxed, the IRS does not require distributions from Roth IRAs at any age.

As with most things investment-related, a lot depends on your particular circumstances. If you have questions, contact your financial advisor or your plan administrator.

Start Saving for Retirement Now

More than 40 percent of Millennials are not saving for retirement at all, according to one recent study.

If you’re in your 20s or 30s and have nothing saved for retirement, now is a good time to get started. Even if you can’t save much, starting early gives your money time to grow. And getting started is probably easier than you think.

A simple savings plan

Let’s say you put $10 per week into a retirement account. That’s just $2 per workday. Let’s also say you invest your savings in a stock fund, which yields an average annual return of 7 percent, compounded annually. (That’s actually pretty conservative based on past market performance.) After 30 years, you’d have $50,000. Not bad for a couple bucks a day.

Of course, you’ll want to save more over the course of your career, but the important thing is getting started early. That’s because your future investment returns will be based not just on the money you invest, but on the returns on those investments as well.

Deferred Compensation – an easy way to save

For public employees, New York State Deferred Compensation Plan is a good place to start.

Deferred Comp is a 457(b) retirement plan created for New York State employees and employees of participating agencies. (It is not affiliated with NYSLRS.) If you are a NYSLRS member but do not work for New York State, check with your employer to see if you are eligible.

Deferred Comp makes withdrawals directly from your paycheck, so once you sign up, you don’t even have to think about it. They also offer packaged investment plans, so you don’t have to be a financial wizard to participate, or you can create a customized investment plan.

The important thing is to get started. Then watch your money grow.

Are You Prepared for a Long Retirement?

Are you planning for a long retirement?We all look forward to a long, happy and financially secure retirement. But as you plan for retirement, “how long?” is an important question.

People are living longer. A 55-year-old man can expect to live another 25 years, to about 80. Women tend to live three or four years longer. But these are only averages. More than 36,000 current NYSLRS retirees are over 85, and more than 3,000 have passed the 95 mark. In fact, in the state fiscal year that ended in March 2016, 336 NYSLRS’ retirees were 101 or older. Considering that many public employees retire at 55, retirement could last 45 years or more.

As you plan for retirement, you need to ask yourself, will I have enough money to maintain a comfortable life for decades to come? Members of the Employees’ Retirement System (ERS) who retired in 2016 are receiving an average monthly pension of $2,364. The average Social Security benefit for a retired worker was $1,355, as of November 2016.

Retirement savings are also a crucial asset, but half of U.S. households with members aged 55 or older have no retirement savings, according to a recent report by the U.S. Government Accountability Office. If you have no retirement savings, it is never too late to start. An easy way to get started is through the New York State Deferred Compensation Plan, a retirement savings program created for New York State employees and employees of participating public agencies.

National Retirement Security Week 2016

This year’s National Retirement Security Week runs from October 16 through 22. It’s a good time to reflect on your personal financial goals and see if you’re on target to meet them. You can ask yourself questions like, “Will I have enough income when I’m retired?” If the answer isn’t clear, you can start taking steps to improve your retirement security.

The Three-Legged Stool: An Example of Retirement Security

Think of your future retirement as a three-legged stool. Each leg represents a different income source that can support you in retirement. The first leg of the stool is your NYSLRS defined benefit pension. Your NYSLRS pension will provide you with a monthly benefit for life based on your service credit and final average salary. The second leg on the stool is your Social Security benefit. Your Social Security benefit is based on how much you earned during your working career. For more details about your Social Security benefit, please visit the Social Security Administration’s website.

The third leg is your own personal savings, such as your own bank or investment accounts. Your personal savings can bridge the gap between what your NYSLRS pension and Social Security will provide. All together, these three legs can support you over the course of your retirement.
Retirement Security in 5 Steps

Ways to Save for Retirement

If you haven’t been maintaining your personal savings, you should start saving as early as possible. The best way to get into the savings habit is to just do it. Here are some suggestions to get into the saving habit:

Also consider looking into accounts that use compound interest. When your money is compounded, it increases in value by earning interest on both the principal and accumulated interest. That way, the more time your money has to grow, the better off you’ll be.

Remember, retirement security just doesn’t happen – it takes planning. You can learn more about retirement planning and our 5 Step Plan for achieving your financial goals on our website.