Tag Archives: Information is the Key

Countdown to Retirement — Final Three Months

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 four to six months away from retirement. As we wrap up our Countdown to Retirement, let’s take a look at what you should be doing in the final three months.

Final Three Months: Filing for Retirement

You need to file an Application for Service Retirement (RS6037) with us 15–90 days before your retirement date. You can download the form from our website or pick up a physical copy at one of our consultation sites. Make sure to fill out the application completely and have it notarized.

If you send the form by “Certified Mail — Return Receipt Requested,” we will consider your application filed on the date it was mailed. Please don’t give your application to your employer; send it directly to NYSLRS.

Next Steps

Once we receive your application, we’ll mail you a confirmation letter. If you’ve received an estimate from us within the past 18 months, we will include three forms with the letter:

  • Use the W-4P form to decide how much you want withheld from your pension benefit for federal taxes.
  • Use the Direct Deposit Enrollment Application (RS6370) to receive your pension benefit payments electronically, right in your bank account.
  • Use the option election form to choose how you want your pension benefit paid and whether you would like to leave a lifetime pension to a beneficiary when you die.

If you haven’t received an estimate, we will just send you the W-4P and Direct Deposit Enrollment Application forms. We will begin processing your estimate, and once it’s complete, we will send it to you along with an option election form.

final three months

Choosing Your Pension Payment Option

Select a payment option based on your most recent estimate. All of the options provide a monthly benefit for life, and some provide payments to a designated beneficiary when you die. You must file this form by the last day of the month in which you retire (unless otherwise notified).

Make Sure You’re Prepared

As your retirement date draws near, think about scheduling an appointment at one of our consultation sites. A consultation is not required, but our information representatives can answer any questions you have, help you complete the paperwork and notarize your retirement application. You can also contact us if you have questions.

Countdown to Retirement — Four to Six 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 eight months away from retirement. As we continue our Countdown to Retirement, let’s take a look at what you should be doing four to six months out.

Six Months: Post-Retirement Budget

At 18 months out, we suggested requesting a NYSLRS retirement estimate. You should have that estimate by now and, with it, a much better idea of what your retirement benefit could be. Now, you can prepare a post-retirement budget and make decisions about your goals and how you want to spend your money in retirement.

We offer worksheets to help you prepare a post-retirement budget on our website. For a more realistic budget, keep track of your current spending for a month or two to get an idea of your expenses. Be sure to factor in periodic expenses, such as car insurance and taxes.

Countdown to Retirement: 4 to 6 months out

Four Months: Proof of Your Birth Date

We will need proof of your date of birth before we can pay you any benefits. You won’t need to send it in until you submit your retirement application, but now is a good time to make sure you have what you need. We’ll accept any of these documents as proof:

  • Birth certificate;
  • Baptismal certificate;
  • Certificate of Release or Discharge from Active Duty (DD-214);
  • New York State driver’s license issued on or after January 1, 2005;
  • Passport; or
  • Naturalization papers.

In most cases, a photocopy is acceptable. If you do send us the original, we will return it to you.

It’s a good idea to look for proof of your birth date sooner rather than later, in case you need to arrange to get a replacement. Also, if you’re thinking about choosing a pension payment option that provides a lifetime benefit to a beneficiary, we will need proof of your beneficiary’s birth date too.

Counting Down

Your planned retirement date is just a few months away. As you approach three months away from retirement, check back for the final post of our Countdown to Retirement series on filing your Application for Service Retirement (RS6037) and other forms. If you have any questions as you prepare for retirement, please contact us.

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.

Taxes and Your NYSLRS Pension

Tax season is coming.

The Internal Revenue Service (IRS) will begin accepting tax returns later this month. In late January, NYSLRS will mail tax information to retirees (and some members and beneficiaries) so they can file their taxes.

1099-Rs

NYSLRS pensions are not subject to New York State income taxes, but they are subject to federal taxes. By January 31, we’ll mail 1099-R tax forms to nearly half a million retirees and beneficiaries. We also mail 1099-Rs to beneficiaries who received taxable income from NYSLRS in 2018, members who have taken taxable NYSLRS loans or have defaulted on their loans, and those who ended their membership and withdrew their contributions in 2018.

A 1099-R shows:

  • The total benefit paid to you in a calendar year.
  • The taxable amount of your benefit.
  • The amount of taxes withheld from your benefit.

If you don’t get your 1099-R by the second week of February, you can request a reprint. This year, reprints will be available for calendar years 2016, 2017 and 2018.

1099-R Interactive Tutorial

1099-r tax form tutorial screenshot

Understanding your 1099-R Tutorial

If you have questions about the information on the form, we feature an interactive 1099-R tutorial on our website. It walks you through a sample 1099-R and offers a short explanation of specific boxes on the form.

Changing Your Federal Tax Withholdings

Because federal tax law was revised for 2018, you may discover that you had too little or too much withheld. You can change your federal tax withholding at any time by sending us a W-4P form. (A handy tutorial about the W-4P  walks you through the steps on filling it out.)

W4-P Tax form tutorial screenshot

Understanding your W-4P Form Tutorial

We offer a federal tax withholding calculator. Enter a marital status and a number of exemptions into the calculator to see how much we would withhold based on current tax tables.

For more information, please visit the Taxes and Your Pension page on our website.

Popular Blog Posts of 2018

Before we say goodbye to 2018, let’s take a look back at a few of the year’s most popular blog posts.

most popular posts of 2018

NYSLRS Basics: Final Average Salary

For NYSLRS members, the formulas used to calculate our pension benefits are based on two main factors: service credit and final average salary. While service credit is fairly straightforward — it’s generally the years of service you’ve spent working for a participating employer — what is a final average salary (FAS)?

Will Your Retirement Age Affect Your Benefit?

Some special plans allow NYSLRS members to retire after 20 or 25 years with no pension reduction. However, most of us have a choice to make: wait until the full retirement age specified by their plans or retire as early as age 55. It’s an important decision; those who retire early may receive a permanently reduced pension benefit.

Federal Withholding and Your Pension

Retirees: While your NYSLRS pension is not taxed by New York State, it is still subject to federal income tax. If your tax bill is larger than expected, or if you’ve been getting a hefty tax refund regularly, you may want to adjust the federal withholding from your NYSLRS pension. Follow these step-by-step instructions.

NYSLRS — One Tier at a Time: ERS Tiers 3 & 4

Many Tier 3 and 4 members of the Employees’ Retirement System (ERS) are eligible to retire under the same retirement plan, so we often think about them together. According to our most recent numbers, the combined tiers make up nearly 60 percent of ERS members — by far the largest segment. Here is a quick look at the benefits these members may receive before and after retirement.

Age Milestones for Retirement Planning

Even with a defined-benefit plan like you receive through NYSLRS, retirement planning is not a one-time task. Whether you’re reviewing your NYSLRS benefits or other retirement matters (like Medicare coverage or required minimum distributions), there are important considerations at almost every age leading up to retirement — and even in the years that follow.

Countdown to Retirement — 12 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 18 months away from retirement. As we continue our Countdown to Retirement series, let’s take a look at what you should be doing 12 months out.

12 Months Out

Domestic Relations Order

Pensions earned during a marriage are considered marital property. So, if you divorce, you may need to split your retirement benefit with your ex-spouse. If you agreed to such a division, or if a court ordered you to share a portion of your pension benefits with your ex-spouse, now is the time to make sure NYSLRS has a valid domestic relations order (DRO) on file:

If you have a DRO, send it to our Matrimonial Bureau, which will review it for consistency with New York State law. If your DRO isn’t complete, visit our website for a NYSLRS-developed DRO template and tips to help the review process move more quickly. We’ll need certified photocopies of the final DRO and your judgement of divorce, before we can distribute any pension benefits to an ex-spouse.

This process can take some time, which is why you want to begin 12 months before you retire.

If you have questions about DROs, you can review our Guide to Domestic Relations Orders.

Review your health insurance coverage

NYSLRS doesn’t administer health insurance benefits, but they’re an important part of a financially secure retirement. Check with your health benefits administrator to determine what coverage you’re eligible for once you retire. Now is the time to investigate private health insurance plans if you’re not eligible for post-retirement coverage or if you need to supplement it. If you are a New York State employee, you may want to review the Planning for Retirement guide from the Department of Civil Service.

countdown to retirement - 12 months out

Counting Down

Your planned retirement date is just a year away. As it gets closer, check out the rest of our Countdown to Retirement series for steps to take eight months, four to six months and one to three months before your retirement date. If you have any questions, please contact us.

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.

Countdown to Retirement — 18 Months Out

After taking time to plan and learn about your NYSLRS retirement benefits, you’ve decided to retire. In the final months leading up to your retirement date, there are important things you need to do. Our Countdown to Retirement series will help you know what to do and when — beginning with 18 months out.

18 Months Out

You should request a NYSLRS retirement estimate 18 months before you plan to retire. Your estimate will provide your approximate pension payment amounts under different payment options, as well as information about your retirement benefits.

To get your NYSLRS retirement estimate, send us a completed Request for Estimate form (RS6030). On the form, make sure you include:

  • Planned retirement date
  • Name and birth date of your intended beneficiary
  • Public employment history

Your public employment history dates don’t have to be exact, but NYSLRS will use this information to review your account to see whether you are eligible for any additional service

countdown to retirement - 18 months out

Your NYSLRS Retirement Estimate

When you receive your NYSLRS retirement estimate, you can expect to see your:

With your NYSLRS retirement estimate, you can see how an outstanding loan balance or additional service credit might affect your pension. This is information you need now; it shouldn’t be a surprise when you retire. You may receive your estimate and decide that you’re not ready to retire. That’s fine; you can request a new one later on.

The NYSLRS retirement estimate is based on the information we have on file for you, so it’s important to review it carefully. If your estimate isn’t what you expected, report any inconsistencies to us as soon as possible.

Counting Down

Your planned retirement date will be here before you know it. As it gets closer, check out the rest of our Countdown to Retirement series for steps to take 12 months, eight months, four to six months and one to three months before your retirement date.

NYSLRS Basics: Special Beneficiary Designations

As a NYSLRS member, it’s important for you to name beneficiaries. When you die, your beneficiaries may be eligible to receive a death benefit. You can choose anyone you wish to receive your death benefit; it does not have to be a family member. In fact, it doesn’t even have to be a person. You can name your estate, a charity or a trust, but it helps to know how these special beneficiary designations work.

There are two main types of beneficiaries. A primary beneficiary is someone you choose to receive your benefit if you die. A contingent beneficiary would receive the benefit if the primary beneficiary dies before you. If a beneficiary dies before you, you should update your beneficiary information to ensure that your benefit is distributed according to your wishes. You can name more than one primary or contingent beneficiary.

Retirement Online is the convenient and secure way to update your beneficiaries. If you don’t already have an online account, you can learn more on our website.

Benefit Distribution

If you name more than one primary beneficiary, each will share the benefit equally. You can also have a certain percentage of the benefit paid to each beneficiary. The percentages don’t have to be equal, but they must add up to 100 percent. (For example, John Doe, 50 percent; Jane Doe, 25 percent; and Mary Doe, 25 percent). The same rule applies for multiple contingent beneficiaries.

Special Beneficiary Designations

Here are the rules pertaining to special beneficiary designations:

special beneficiary designations

Trusts

If you have executed a trust agreement or provided for a trust in your will, your trust can be your primary or contingent beneficiary. To name a trust, sign in to Retirement Online or use our Trust with Contingent Beneficiaries form (RS5127-T).  We’ll need a copy of your trust document, which you can mail to NYSLRS.

With this type of designation, the trust is the beneficiary, not the individuals who will receive the trust. If you revoke the trust or it expires, you will want to make new beneficiary designations as soon as possible to ensure benefits are paid according to your wishes.

You should talk to a lawyer if you’d like more information on trust agreements.

Estates

You may name your estate as the primary or contingent beneficiary of your death benefit. If you name your estate as your primary beneficiary, you cannot name a contingent. If a benefit is payable, the executor of your estate will distribute it according to your will.

Entities

You may name any charitable, civic, religious, educational or health-related organization as a primary or contingent beneficiary.

Minor Children

If your beneficiary is under age 18 at the time of your death, your benefit will be paid to the child’s court-appointed guardian. You may also choose a custodian to receive the benefit on the child’s behalf under the Uniform Transfers to Minors Act (UTMA). Before making this type of designation, please contact us for more information.

More Information

Please note that some of these beneficiary designations will be subject to a NYSLRS legal review.

For more information, please read our publication “Why Should I Designate a Beneficiary?” You can find your current NYSLRS beneficiaries listed in Retirement Online, or in your Member Annual Statement, which is sent out every summer.

Dual Membership in NYSLRS

The New York State and Local Retirement System (NYSLRS) consists of two retirement systems: the Employees’ Retirement System (ERS) and the Police and Fire Retirement System (PFRS). Your job title determines what system you’re in. In some cases, however, it’s possible to have a dual membership, to be a member of both systems. As of State fiscal year end 2018, 1,574 members had memberships in both ERS and PFRS.

How Does Dual Membership Work?

dual membership in NYSLRSLet’s say you work as a fire fighter, so you’re a member of PFRS. You decide to take on a part-time job as a bus driver for your local school district. Your school district participates in ERS, so you’re eligible for ERS membership. You fill out the membership application, and now you’re a member of both ERS and PFRS. The date you join each system determines your tier in each membership.

Implications of Dual Membership

As a member of both systems, you’d have separate membership accounts. Let’s look again at our fire-fighting bus driver example. While working as a fire fighter, you make any required contributions and earn service credit toward your PFRS pension only. The same is true for your work as a bus driver—your required contributions and earned service credit only go toward your ERS pension, not your PFRS pension.

There are other implications to dual membership. Assuming you’re vested in both memberships and meet the service credit and age requirements, you could retire and collect a pension from both systems. You’d need to file separate retirement applications for ERS and PFRS, and we’d calculate each pension separately. We’d calculate your ERS pension using the final average salary (FAS) you earned as a bus driver and your PFRS pension using the FAS from your time as a fire fighter.

And, since you’d have both an ERS pension and a PFRS pension, you would need to choose a beneficiary for each in the event of your death.

Questions?

You’ll want to make sure to know the details of your retirement plan in each system. If you have any questions about dual membership, or to discuss your particular situation when you decide to retire, please contact us.