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. Financial security doesn’t just happen—it takes preparation and time. Even if retirement seems far off, it’s never too early to start planning.
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.
As a NYSLRS member, you are enrolled in a defined benefit plan, also known as a traditional pension plan. When you retire, you will receive a monthly pension payment for the rest of your life. Your pension will be calculated using a preset formula based on your earnings and years of service—it will not be based on the individual contributions you paid into the system.
Your NYSLRS pension is a good reason to be optimistic about your finances in retirement. But there is more to a financially secure retirement than having a pension. 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.
If you want to improve your chances of a financially secure retirement, your plan should include retirement savings. It’s important to start saving early so your money has time to grow. When you invest your savings in an individual retirement account (IRA) or a 401(k)-style retirement savings plan, you earn a return on your investment, and those returns are compounded.
For greater financial stability and flexibility, you may want to invest in a deferred compensation savings plan. The New York State Deferred compensation plans are voluntary retirement savings plans like a 401(k), created for New York State employees and employees of other participating public employers.
As you get close to retirement, it’s a good idea to take inventory of any debt you owe. Paying down your debt—including any NYSLRS loans—will help avoid a pension reduction and can give you more flexibility in retirement.
Service credit is a major factor in calculating your NYSLRS pension. You earn one year of service credit for each year of full-time employment with a participating employer. (Read about how you earn service credit when you work part-time or how school employees earn service credit). You may also be able to request additional service credit if you worked for your current or another public employer before joining NYSLRS, or if you served in the U.S. Armed Forces and received an honorable discharge from active military duty. In most cases, you have to purchase additional service credit, but it will usually increase your pension.*
You should request additional service credit as early in your career as possible, andyou must do so before retirement. The sooner you purchase your credit, the less it will generally cost.
*There are certain situations where additional service credit may not increase your pension. For example, special retirement plans for police officers and firefighters allow retirement after 20 or 25 years of service regardless of age, but not all types of public employment count toward the 20 or 25 years in these plans. Contact us if you have questions.
How to Request Additional Service Credit
You can request additional service credit in Retirement Online.
Additional service credit includes work for an employer who later joined NYSLRS or for public employment before you became a NYSLRS member.
Example: You worked at the town library while going to school and, as a part-time employee, you chose not to join NYSLRS. When you graduated and took a full-time job at the Town Supervisor’s office, you were required to join NYSLRS. You can request credit for the part-time service at the library.
When you apply:
Enter the name of the employer and the approximate dates you worked there.
Upload any proof you may have of your previous service. We will also reach out to your former employer, but you can expedite the process by providing payroll records such as W-2 forms or pay stubs when you submit your request.
You must have two years of service credit before additional service can be credited to you.
Military Service Credit
If you served in the U.S. armed forces, you may be eligible to purchase credit toward your retirement for your military service, regardless of whether your military service was before or after you joined NYSLRS.
There are different sections of the law that allow credit for military service. The amount of military service credit you can receive, and the cost (if any), will vary depending on which section of the law allows the credit. Reserve and National Guard service may qualify if it’s considered active duty.
When applying online:
Enter the branch of military in the field for employer and the dates of your service.
Upload a copy of your Certificate of Release or Discharge from Active Duty (DD-214) or an official document showing the dates of active duty service, the branch of military and the type of discharge (to receive credit for military service, you must have received an honorable discharge).
For certain military service, you must have five years of service credit before you can apply.
Reinstating or Transferring Membership
There may be other ways to increase your retirement service credit. If you had a previous membership in a New York State public retirement system and it was terminated, you may be able to reinstate your membership. If you still have an active membership in another public retirement system in New York State but you are no longer working for the employer that participates in that retirement system, you may be able to transfer your membership to NYSLRS.
If you’re thinking about borrowing against your retirement contributions, it’s important to understand whether your NYSLRS loan will be subject to taxes before you apply. Once you submit a loan application and we issue a check, you cannot return an uncashed check, and the loan fee is nonrefundable.
Determining the Taxability of Your NYSLRS Loan
When you apply for a NYSLRS loan, all your existing NYSLRS loans and any loans against other retirement plans will be used in calculating the taxability of a new NYSLRS loan. If you participate in another retirement plan offered through your employer, you must disclose existing loans and the contribution balances for the following types of plans:
Deferred compensation plan (457)
Tax sheltered annuity plan (403-b)
Qualified annuity plan (403-a)
Qualified trust (401)
If You Have Existing NYSLRS Loans
If you have one or more NYSLRS loans and are considering another loan, you’ll have two options:
Multiple loans. With multiple loans, you would take out a new loan in addition to your existing loan(s). Each loan would have separate 5-year terms and minimum payments. The minimum payments for all your loans would be combined into one total repayment amount, which would be higher than the minimum payment for a refinanced loan. However, your total minimum payment would decrease as you pay off each loan.
Refinance your existing loan. With refinancing, your new loan would be consolidated with the balance of your existing loan(s) into a single loan for the entire amount. The total loan amount would be spread over a new 5-year term with one minimum payment, which would be lower than the total minimum payment for multiple loans. However, refinancing would increase how much of your loan is considered a taxable distribution, which would either subject the loan to federal taxes or significantly reduce the amount of the loan to avoid any tax implications.
Understanding the Impact on Your Taxes
While a NYSLRS loan is exempt from New York State and local income taxes, it may be subject to federal taxes. If your loan exceeds certain limits, the Internal Revenue Service (IRS) will consider all or part of it as a “deemed distribution from a qualified retirement plan.” In other words, you will have to claim all or part of your loan as taxable income when you file your taxes the next year.
NYSLRS is also required to withhold a percentage of the loan for federal taxes, which will reduce the amount you receive. The tax withholding depends on your citizenship, so the loan application asks if you are a U.S. citizen, resident alien or non-resident alien. However, the amount withheld may not cover the total amount you will owe the IRS. For example, if you take a taxable loan before you turn 59½, the IRS may charge an additional 10 percent tax penalty.
If you take a taxable loan, we’ll mail a 1099-R by January 31 of the following year to file with your taxes.
Remember: Even if a portion of your loan goes to the IRS, you’ll still have to repay the entire amount, plus interest, to NYSLRS.
We recommend that you speak to a tax advisor or a NYSLRS customer service representative before taking a taxable loan. For more information about taking a loan from NYSLRS, visit our Loans: Applying and Repaying page.
Ready to Apply for a NYSLRS Loan?
Retirement Online is the fastest and most convenient way to apply for a NYSLRS loan. When you use Retirement Online, NYSLRS receives your application immediately and can process your loan more quickly. Retirement Online will also let you know how much you can borrow, your repayment options and whether your loan is taxable.
If you don’t have an account or for help signing in to an existing account, check out our Retirement Online tools and tips for step-by-step instructions to register, reset your password, unlock your account and more.
If you are eligible to borrow against your retirement contributions, Retirement Online is the fastest and most convenient way to apply for a NYSLRS loan.
Eligibility is based on your tier. Generally, you’ll need to be on the payroll of a participating employer, have at least one year of service credit and have the required minimum contributions in your account. (Note: Retirees are not eligible for NYSLRS loans.)
Retirement Online is the Fastest Way to Apply
When you use Retirement Online, NYSLRS receives your application immediately and can process your loan more quickly.
If you don’t have an account or for help signing in to an existing account, check out our Retirement Online tools and tips for step-by-step instructions to register, reset your password, unlock your account and more.
As you work your way through the online application, you’ll see:
How much you are eligible to borrow with or without tax implications;
The minimum repayment amount; and
The expected payoff date.
For Tier 3–6 members, there’s a service charge of $45, which is deducted from your loan check when it is issued.
The current interest rate, which is fixed for the term of your loan, is 5 percent.
NYSLRS loans are exempt from New York State and local income taxes. However, a NYSLRS loan would be subject to federal taxes if it exceeds certain limits. Retirement Online will show you the maximum you can borrow without tax implications.
If you apply for a loan and already have one or more existing loans, you’ll have two options:
Multiple loans. With multiple loans, you would take out a new loan in addition to your existing loan(s). Each loan would have separate 5-year terms and minimum payments. The minimum payments for all your loans would be combined into one total repayment amount, which would be higher than the minimum payment for a refinanced loan. However, your total minimum payment would decrease as you pay off each loan.
Refinance your existing loan. With refinancing, your new loan would be consolidated with the balance of your existing loan(s) into a single loan for the entire amount. The total loan amount would be spread over a new 5-year term with one minimum payment, which would be lower than the total minimum payment for multiple loans. However, refinancing would increase how much of your loan is considered a taxable distribution. To avoid any tax implications when refinancing, the amount of your new loan would be significantly less than taking out multiple loans.
When Will I Receive My Loan Check?
NYSLRS mails loan checks once a week. To check the status of your loan application:
If your case status is Closed before close of business on Wednesday, your check will be in the mail that Friday.
You will also receive a confirmation letter when your loan case is complete. In your Retirement Online account, click the Find Documents link to search for correspondence.
Repaying Your NYSLRS Loan
Loan payments are deducted from your paycheck. After you receive your loan check, you should review your pay stub to confirm that your employer has started payroll deductions and is deducting the correct repayment amount.
If you choose to repay the minimum amount, the payment may increase periodically to ensure you repay the loan within the required 5-year period.
You can increase your payroll deduction amount, make additional payments or pay your loan in full at any time with no prepayment penalties. Repaying your loan sooner will reduce the total amount of interest you’ll pay on the loan.
Retirement Online is the fastest and most convenient way to manage your loan payments.
If you retire with an outstanding loan, your pension will be permanently reduced. In most cases, you’ll need to report at least some portion of the loan balance as income to the Internal Revenue Service (IRS). If you retire before age 59½, the IRS may also charge an additional 10 percent penalty.
If you are close to retirement, use Retirement Online to check your loan balance and make sure you’re on track to repay your loan before you retire.
Note: Employees’ Retirement System (ERS) members can repay their loan after retiring. If you choose to pay back your loan after you retire, you must pay the full amount of the outstanding balance that was due when you retired in a single lump sum payment. Following full repayment, the reduction would be removed, and your pension benefit would increase going forward—the adjustment would not be retroactive to your date of retirement.
Financial security doesn’t just happen; it takes planning and time. You know you can count on your NYSLRS pension in retirement. But, if you want to improve your chances of a financially secure retirement, your plan should include retirement savings. It’s important to start saving early so your money has time to grow.
When you invest your savings in an individual retirement account (IRA) or a 401(k)-style retirement savings plan, 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 into 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’ll 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 is reinvested along with your earnings. 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.
If you’re already building retirement savings, think about giving your savings a boost. If you haven’t started saving yet, right now is the best time to start. The New York State Deferred Compensation Plan (NYSDCP) is available to New York State employees and some municipal employees. 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. Remember, the sooner you start saving, the more time your money has to grow.
Most NYSLRS members can create their own pension estimates 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 and beneficiaries to see how those choices would affect your benefit. When you’re done, print your pension estimate or save it for future reference.
Remember, the amounts are estimates, not a guarantee of what you’ll receive when you retire.
Most Tier 2 through 6 members (more than 90 percent of all NYSLRS members) can use the Retirement Online pension calculator. However, some members may not be able to—for example, members who recently transferred to NYSLRS and some PFRS members. The system will let you know if your estimate cannot be completed. In that case, please send us a message using our secure contact form (select Estimates from the Topic dropdown).
Do More With Retirement Online
In Retirement Online, you can view your account details—date of membership, tier, retirement plan, estimated total service credit and more. Check out what else members can do in Retirement Online.
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 and a beneficiary you named before might not be one you would choose today. For instance, you may have a new partner or you may have children now. And NYSLRS can only pay a death benefit to the beneficiaries you’ve named.
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.
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.
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.
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).
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.
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.
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.
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.
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:
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.
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.
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.
Retirement Online is the fastest and most convenient way to 
