Tag Archives: ERS

Deferred Compensation: Another Source of Retirement Income

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Many financial experts cite a common rule of thumb when discussing income in retirement. They say you need 70 to 80 percent of your pre-retirement income to maintain your standard of living once you retire. This is meant to account for the range of expenses you’ll no longer have in retirement, such as payroll taxes, commuting costs or saving for retirement. As a NYSLRS member, your plan for income in retirement likely includes your NYSLRS pension and Social Security benefits. However, for greater financial stability and flexibility, you may want to supplement with retirement savings. For example, you might start investing in a savings plan like the New York State Deferred Compensation Plan (NYSDCP).

Deferred Compensation: Another Source of Retirement Income

What is Deferred Compensation?

Deferred compensation plans are voluntary retirement savings plans like 401(k) or 403(b) plans—but designed and managed with public employees in mind. NYSDCP is the 457(b) plan created for New York State employees and employees of other participating public employers in New York.

Once you sign up for NYSDCP, you can build your own investment portfolio or invest in established investment funds. Your contributions can be automatically deducted from your paycheck, and you can contribute as little as 1 percent of your earnings.

Just like with other retirement savings plans, you have options for how you make your NYSDCP contributions. You might choose a tax-deferred account where you make contributions with pre-tax money. With this option, you won’t pay State or federal taxes on the earnings you contribute until you start making withdrawals. Your employer may also offer the option for a Roth account where you make contributions with after-tax money. With this option, you do pay taxes now, but you won’t pay taxes on the withdrawals you make in retirement. Learn more about how traditional retirement savings and Roth accounts compare.

If your employer is not an NYSDCP participating employer, check with your human resources or personnel office about other retirement savings options.

What Does Deferred Compensation Mean for Me?

Deferring income from your take-home pay may mean less money to spend in the short-term, but you’re planning ahead for your financial future.

You can enroll in a deferred compensation plan anytime—whether you’re close to retirement or you just started working. Usually, the sooner you start saving, the better prepared you’ll be for retirement.

Supplement Your NYSLRS Pension with Retirement Savings

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As a NYSLRS member, you are enrolled in something increasingly rare these days: a defined benefit plan. If you are vested and retire from NYSLRS, you will receive monthly pension payments for the rest of your life based on your years of service and earnings. Your NYSLRS pension can provide a significant part of your retirement income, but it’s a good idea to supplement your pension and Social Security with a retirement savings account.

Additional retirement savings can give you flexibility to travel, continue your education, pursue a hobby or start a business. It can be a resource in case of an emergency or act as a hedge against inflation.

Your Retirement Savings Goal

How much you save is a personal decision. You can  estimate your pension in Retirement Online to get an idea of the income it will provide in retirement. Use a retirement savings calculator to see how much a retirement savings plan could yield over time. Test the results with different savings amounts.

Below you can see the potential savings of someone who invests 50 dollars every two weeks for 30 years. While the stock market can be turbulent in the short term, in the long term, it returns on average about 10 percent a year as measured by the S&P 500 index.

saving for retirement

As you get closer to retirement, you should develop a plan to withdraw money from your savings. That will give you a better idea of the income you might expect from your nest egg and a sense of how long it will last.

Here is one possible withdrawal strategy, which provides retirement income for 20 years. Please note, if your retirement is far in the future, the money you withdraw may not have the same value that it would have today.

withdrawing income

If you find you’ll need to save more to meet your goal, you can make adjustments to help ensure you’ll have enough savings in retirement.

Note: Generally, whatever your withdrawal strategy, federal law will eventually require you withdraw a certain amount each year from any tax-deferred retirement plan account. These are called required minimum distributions.

New York State Deferred Compensation Plan

One way State employees and many municipal employees can save for retirement is through the New York State Deferred Compensation Plan (NYSDCP). Once you’ve signed up, your retirement savings—which may be tax-deferred depending on the plan you choose—will be automatically deducted from your paycheck.

Check with your employer’s human resources or personnel office to see whether they participate in NYSDCP or if they offer other savings options. (NYSDCP is not affiliated with NYSLRS.)

Read More About Retirement Savings

When it comes to saving for retirement, there’s a lot to consider. You can find more information in these posts:

A Look Inside NYSLRS

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Let’s take a look inside the New York State and Local Retirement System (NYSLRS) and what makes it one of the largest and best retirement systems in the United States.

NYSLRS administers two distinct systems. They are:

  • The Employees’ Retirement System (ERS) with 677,604 members; and
  • The Police and Fire Retirement System (PFRS) with 36,198 members.

In addition, NYSLRS provides pension benefits to more than 520,000 retirees and beneficiaries. Altogether, that’s more than 1.2 million participants!

A Look Inside NYSLRS

New York State Common Retirement Fund

State Comptroller Thomas P. DiNapoli is administrative head of NYSLRS and trustee of the New York State Common Retirement Fund, which was valued at $267.4 billion as of March 31, 2024. The Fund is widely recognized as one of the best-managed and best-funded public pension plans in the nation. Since its establishment in 1921, the Fund’s prudent investment management, solid returns, and constitutionally protected benefits have provided retirement security for generations of hard-working New Yorkers.

NYSLRS Members                                                          

How did NYSLRS earn the distinction of being one of the largest systems? Here are some facts about NYSLRS members:

  • 527,404 active members (that is, members still on the public payroll) work for 2,988 public employers statewide.
  • About one-third of those active members work for New York State. The rest work for counties, cities, towns, villages, school districts and public authorities.
  • Nearly 94 percent of total active members are in ERS while only 6 percent of total active members are in PFRS.
  • Tier 6 is our largest benefit group, with more than 60 percent of all members (62.6 percent in ERS, 56 percent in PFRS).
  • In ERS, Tiers 3 and 4 are the second largest benefit group, with 33.1 percent of members.
  • While, in PFRS, Tier 2 is the second largest benefit group, with 38.7 percent of members.

For more information about our largest ERS tiers, see our blog posts, ERS Tier 6 Milestones and ERS Tiers 3 and 4 Milestones. You can also learn more about the PFRS Milestones our police and fire fighters across New York State will reach over the course of their careers.

NYSLRS Retirees and Beneficiaries

The average pension for an ERS retiree was $27,870; the average for a PFRS retiree was $62,391. But these pension payments don’t just benefit retirees and beneficiaries. During 2022, approximately 78 percent of retirees lived in New York State and were responsible for $17.3 billion in economic activity. By supporting local businesses, helping to create jobs and paying their fair share of taxes, NYSLRS retirees contribute to the economic health of our communities.

Learn More About NYSLRS

Detailed information about NYSLRS members, retirees and beneficiaries as well as the Fund’s position and performance can be found in the 2024 Annual Comprehensive Financial Report.

Note: All data is as of the State fiscal year end, March 31, 2024.

Choosing Your Pension Payment Option

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Your NYSLRS pension will provide you with a monthly benefit for the rest of your life. When you apply for retirement, you’ll have the option to choose the maximum amount payable or a reduced benefit in exchange for possibly continuing payments to a beneficiary upon your death. There’s a lot to consider when choosing a pension payment option, so let’s break this down using an example.

Choosing Your Pension Payment Option

Meet Jane

Jane plans to retire soon and considers whether she should leave a continuing benefit to her husband or grandchildren.

No Beneficiaries

The Single Life Allowance option would provide the maximum monthly benefit payment, but all payments will stop when Jane dies, and nothing will be paid to a beneficiary.

Multiple Beneficiaries, Limited Benefit

For Jane to name both of her grandchildren as beneficiaries, she would have to select either the Five Year Certain or Ten Year Certain option—these pension payment options provide a limited benefit for multiple beneficiaries and wouldn’t reduce her pension much. If Jane dies within five or ten years of retirement, depending on which option she chooses, Jane’s grandchildren would split her pension benefit for the remainder of the five- or ten-year period. However, if Jane lives beyond the five- or ten-year period, her grandchildren would not receive a pension benefit when she dies. (Note: Jane could select one of these options and name just one beneficiary, for example, her husband instead of her grandchildren.)

Single Beneficiary, Lifetime Benefit

Jane’s husband doesn’t have his own pension, so she also considers pension payment options providing a lifetime benefit for a single beneficiary. Under the Joint Allowance — Full or Joint Allowance — Half options, Jane’s husband would receive all or half of her reduced benefit for life, depending on which option she chooses. The same goes for the Pop-Up/Joint Allowance — Full or Pop-Up/Joint Allowance — Half options. While these “pop-up” options reduce the pension a little more, they provide added security—if Jane outlives her husband, her monthly payment will increase to the maximum amount as if she selected the Single Life Allowance option at retirement.

Pension payment amounts are based on the birth dates of both the retiree and their beneficiary. So, if Jane chose one of these options and named one of her grandchildren as her beneficiary, her pension would be much lower than the amounts listed in the graphic.

Things to Consider

As you plan for your own retirement and think about whether to leave a continuing benefit for a beneficiary, you may want to consider both your spouse’s and your:

  • Financial needs (for instance, whether you have a mortgage, unpaid loans or other monthly payments).
  • Other sources of retirement income (for example, Social Security or savings).
  • Options for continuing benefits (for example, whether your retirement plan includes a death benefit or if you have life insurance).
  • Age and health at retirement.

It’s also important to understand whether you can change your beneficiary after you retire. Life circumstances can sometimes change, and if you choose a pension payment option that provides a lifetime benefit, you cannot change your beneficiary. 

Find your NYSLRS retirement plan publication to learn more about pension payment options and how your pension will be calculated. You can also estimate your pension using Retirement Online, and enter different retirement dates and beneficiary birth dates to see how those choices would affect your benefit. When you’re done, print your pension estimate or save it for future reference.

Pension Payment Options: Providing a Lifetime Benefit for a Single Beneficiary

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Your NYSLRS pension will provide you with a monthly benefit for the rest of your life. When you apply for retirement, you’ll have the option to choose the maximum amount payable or a reduced benefit in exchange for possibly continuing payments to a beneficiary upon your death. In this post, we’ll explore the Joint Allowance and Pop-Up/Joint Allowance pension payment options which provide a lifetime benefit for a single beneficiary.

Joint Allowance and Pop-Up/Joint Allowance Pension Payment Options

Joint Allowance Pension Payment Options

In exchange for a permanent reduction in your monthly pension payment, the Joint Allowance options provide a lifetime benefit to a beneficiary after you die.

You can select either:

  • Full: Your beneficiary will receive the same monthly pension payment as you were receiving for life.
  • Half: Your beneficiary will receive half of the monthly pension payment you were receiving for life.
  • Partial: Your beneficiary will receive either 75, 50, or 25 percent of the monthly pension payment you were receiving for life.

You can only choose one beneficiary under a Joint Allowance option, and you cannot change your beneficiary after you retire—regardless of the circumstances. If your beneficiary dies before you, all payments will stop when you die.

Pension payment amounts are based on the birth dates of both you and your beneficiary. Because life expectancy is a factor, the reduction to your pension payment amount will be more if you select a child or grandchild than a spouse of a similar age as you.

If you designate your spouse as your beneficiary, they would be eligible to receive 50% of your cost-of-living adjustment.

Pop-Up/Joint Allowance Pension Payment Options

The Pop-Up/Joint Allowance options have all the same terms of the Joint Allowance options with added security—if your beneficiary dies before you, your monthly pension payment will “pop up” or increase to the amount you would have been receiving had you chosen the Single Life Allowance option at retirement. (Note: This only affects future payments. You would not be entitled to retroactive payments.) Therefore, the Pop-up/Joint Allowance options reduce your monthly pension payment a little more than a comparable Joint Allowance option.

Other Pension Payment Options

The Single Life Allowance provides the maximum monthly pension payment to you for the rest of your life. However, this option does not provide a continuing benefit. All payments will stop when you die, and nothing will be paid to a beneficiary.

Some pension payment options provide a limited benefit for multiple beneficiaries.

Things to Consider

When choosing your pension payment option, you may want to consider both your spouse’s and your:

  • Financial needs (for instance, whether you have a mortgage, unpaid loans or other monthly payments).
  • Other sources of retirement income (for example, Social Security or savings).
  • Options for continuing benefits (for example, whether your retirement plan includes a death benefit or if you have life insurance).
  • Age and health at retirement.

You only have 30 days after the last day of your retirement month to change your option. After that date, you cannot change your option for any reason.

Estimate Your Pension in Retirement Online

Most members can use Retirement Online to create a pension estimate based on the most up-to-date salary and service information we have on file. You can enter different retirement dates, beneficiaries and pension payment options to see how they affect your potential benefit.

When you’re done, print your pension estimate or save it for future reference.

Pension Payment Options: Providing a Limited Benefit for Multiple Beneficiaries

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Your NYSLRS pension will provide you with a monthly benefit for the rest of your life. When you apply for retirement, you’ll have the option to choose the maximum amount payable or a reduced benefit in exchange for possibly continuing payments to a beneficiary upon your death. In this post, we’ll explore the Five Year Certain and Ten Year Certain pension payment options which provide a limited benefit for multiple beneficiaries.

Five and Ten Year Certain Pension Payment Options

Five and Ten Year Certain Pension Payment Options

In exchange for a permanent reduction in your monthly pension payment, the Five Year Certain and Ten Year Certain options provide a limited benefit to one or more beneficiaries after you die.

If you die within five or ten years after your retirement, payments in the same amount as you were receiving will be paid to your beneficiaries for the remainder of the five- or ten-year period. However, if you live beyond the five- or ten-year period, your beneficiaries will not receive a pension benefit when you die.

For example, let’s say you choose the Five Year Certain option. If you die two years after retiring, your beneficiary will receive your monthly pension payment for three years. Or, if you choose the Ten Year Certain option and die after two years, your beneficiaries will receive your monthly pension payment for eight years. In either case, your beneficiary would receive the same amount you were receiving. If you designate your spouse as your beneficiary, they would be eligible to receive 50% of your cost-of-living adjustment.

While these options don’t provide a lifetime benefit for your beneficiary, they do have advantages you may want to consider. With these options, you can:

  • Name multiple beneficiaries.
  • Change your beneficiaries at any time within the five- or ten-year period.

Other Pension Payment Options

The Single Life Allowance provides the maximum monthly pension payment to you for the rest of your life. However, this option does not provide a continuing benefit. All payments will stop when you die, and nothing will be paid to a beneficiary.

Some pension payment options provide a lifetime benefit for a single beneficiary.

Things to Consider

When choosing your pension payment option, you may want to consider both your spouse’s and your:

  • Financial needs (for instance, whether you have a mortgage, unpaid loans or other monthly payments).
  • Other sources of retirement income (for example, Social Security or savings).
  • Options for continuing benefits (for example, whether your retirement plan includes a death benefit or if you have life insurance).
  • Age and health at retirement.

You only have 30 days after the last day of your retirement month to change your option. After that date, you cannot change your option for any reason.

Estimate Your Pension in Retirement Online

Most members can use Retirement Online to create a pension estimate based on the most up-to-date salary and service information we have on file. You can enter different retirement dates, beneficiaries and pension payment options to see how they affect your potential benefit.

When you’re done, print your pension estimate or save it for future reference.

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 the 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 NYSLRS Loan Balance Could Affect Your Pension

It is important to understand:

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

When you apply for retirement in Retirement Online and have an outstanding NYSLRS loan balance, the system will provide a specific pension reduction amount for you. The loan applications on our Forms page also list general pension reduction information.

If you are close to retirement, be sure to check your loan balance. If it looks like you won’t 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: Applying and Repaying page).

ERS members may repay a loan after retiring. They must pay the full balance that was due at retirement in a single lump sum payment. Once they repay the loan, their pension will increase to the amount it would have been without the loan reduction. It will not increase retroactively back to the date of retirement.

Other Debt to Check

Credit Cards

Another priority should be paying off credit cards before retirement. Credit card statements include a warning telling 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 paying as much as you can on the card with the highest interest rate, while still making at least the minimum payments on your lower-interest cards. Once you’ve paid off your highest-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 there is to gain a sense of accomplishment, and make the process seem less daunting.

Mortgages

Advice varies on whether you should try to pay off your mortgage before you retire. 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.

Compounding: Use Time to Grow Your Money More

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Financial security doesn’t just happen; it takes planning and time. You know you can count on your NYSLRS pension income in retirement. But, if you want to improve your chances of a financially secure retirement, your plan should include personal savings. It’s important to start saving and investing early so your money has time to grow.

You might invest in an Individual Retirement Account (IRA) or a 401(k)-style retirement savings plan. When you do, you earn a return on your investment, and those returns are compounded. That means your money increases in value by earning returns on both the original amount and your accumulated profits. This is different than earning simple interest. Let’s see how they both work.

How Simple Interest Works

In banking, simple interest is a certain percentage you are paid on the money you put in your account. With simple interest, the amount of interest you earn is based on the original (or principal) amount of the deposit.

Let’s say you open a Certificate of Deposit (CD) which pays 5 percent simple interest if you agree to keep your money in the CD for a year. If you deposit $1,000 in January, you’d have $1,050 at the end of the year. That’s $50 more than you started with, so you might decide to keep your money there for another year. With simple interest, the interest you earn the second year and every year after would still be based on the principal amount of $1,000—no compounding.

How Compounding Works

With compounding, your initial investment plus your earnings are reinvested. If you earn the same 5 percent, with compounding, it’s applied to the full balance of your account. So, you would still have that $1,050 at the end of the first year, but by the end of the second year you’d have $1,102.50 in your account instead of $1,100.

In this example, that’s just a difference of $2.50, but, over time, compounding can mean a difference of hundreds or thousands of dollars.

The Power of Compounding

If you’re thinking about boosting your personal savings for retirement, look for accounts using compound interest. For example, the New York State Deferred Compensation Plan (NYSDCP) is the 457(b) plan created for New York State employees and employees of other participating public employers in New York. The sooner you can start saving, the more time your money has to grow.

National Retirement Security Month

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October is National Retirement Security Month. It’s a time to consider the importance of saving and to think about potential sources of income in retirement. Even if retirement seems far off, it’s never too early to start planning.

Retirement Security

NYSLRS and Retirement Security

Check out these blog posts to learn more about how your NYSLRS pension and other sources of retirement income can provide retirement security.

  • What is a Defined Benefit Plan?
    Your NYSLRS pension is a defined benefit retirement plan. When you retire, you’ll receive a guaranteed, lifetime benefit based on your earnings and years of service. A preset formula determines your benefit; it’s not limited to your accumulated contributions and investment returns, like with a 401(k)-style plan.  
  • The 3-Legged Stool Approach to Retirement Confidence
    Think of your retirement security as a three-legged stool. Each leg represents a different income source that supports you in retirement. The first leg of the stool is your NYSLRS pension, and the second is your Social Security benefit. The third leg is your own personal savings, which can help provide security in retirement and give you more freedom to do the things you want to do.
  • Compounding: A Great Way for Your Money to Grow
    The sooner you start saving, the better—especially if you invest in a retirement savings plan that reinvests the returns you earn. Such compounded savings increase in value by earning interest on both the principal and accumulated returns. But for your money to make more money in this way, it needs time to grow.
  • Deferred Compensation: Another Source of Retirement Income
    Deferred compensation plans are voluntary retirement savings plans like 401(k) or 403(b) plans designed and managed with public employees in mind. You can contribute as little as 1 percent of your earnings—automatically deducted from your paycheck. Deferring income from your take-home pay may mean less money to spend in the short-term, but it’s an easy way to start saving extra for retirement.
  • Give Your Retirement Savings a Boost
    Once you’ve started saving for retirement, you may want to look for ways to increase how much you save. Even small increases can make a big difference over time—and may have a minimal impact on your take-home pay.

Remember, retirement security doesn’t just happen—it takes planning.

Visit our Retirement Planning page for more information about your NYSLRS pension, including a calculator to estimate your monthly payments and a tool to help you find your retirement plan publication for a complete description of your benefits.

Your Death Benefit Beneficiaries

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NYSLRS retirement plans provide death benefits for beneficiaries of eligible members who die before retiring.

It’s important to name beneficiaries and review them periodically. Life circumstances change—for instance, you may have a new partner, or you may have children now. The beneficiary you may have named before might not be the one you would choose today. And NYSLRS can only pay a death benefit to the beneficiaries you’ve named.

If you are retired or planning to retire soon, read our blog post, Can You Change Your Beneficiary After You Retire?

2 Types of Beneficiaries

  • Your primary beneficiary will receive your death benefit. You can list more than one primary beneficiary. If you do, they will share the benefit equally. Or, you can choose different percentages for each beneficiary, which must total 100 percent. (Example: John Doe, 50 percent; Jane Doe, 25 percent; and Mary Doe, 25 percent.)
  • A contingent beneficiary will only receive a benefit if all your primary beneficiaries die before you do. If you list multiple contingent beneficiaries, they will share the benefit equally unless you choose different percentages.

Special Beneficiary Designations

Your beneficiary doesn’t have to be a person. You can name your estate, a trust or a charity as your beneficiary.

Special Designations for Your NYSLRS Death Benefit Beneficiaries
  • Estate. When you die, your estate is the money and property you owned. Your death benefit will be given to the executor of your estate to be distributed according to the terms of your will. You can name your estate as the primary or contingent beneficiary of your death benefit. If you name your estate as the primary beneficiary, do not name a contingent beneficiary.
  • Trust. You can name a trust as a primary or contingent beneficiary if you have a trust agreement or provided for a trust in your will. The trust itself would be your beneficiary, not the individuals for whom you established the trust. (Speak with your attorney if you’re thinking about making your trust a beneficiary.)
  • Entity. You can also name any charitable, civic, religious, educational or health-related organization as a beneficiary.
  • Minor children. If your beneficiary is under the age of 18 at the time of your death, your benefit will be paid to the child’s court-appointed guardian. You may instead choose a custodian to receive the benefit on the child’s behalf under the Uniform Transfers to Minors Act (UTMA). Custodians can be designated in Retirement Online, or you can contact us for more information and the appropriate form before making this type of designation.

For more information, read our publication, Life Changes: Why Should I Designate a Beneficiary?

Keep Your Beneficiaries Up to Date with Retirement Online

You can change your beneficiaries at any time. In addition to adding or removing them to reflect your current wishes, you should review the contact information for your named beneficiaries so we can find them when needed.

The fastest way to view or update your beneficiaries is in Retirement Online.