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.
Retirement is a big step, and we want to make sure you’re ready when the time comes. Read on for guidance on preparing for retirement, including topics to consider as you plan and actions to take.
Understand Your NYSLRS Pension
Your NYSLRS pension will be based on your tier, service credit, final average earnings and your retirement plan. For most members, age is also an important factor in your NYSLRS benefits.
Service credit is one of the major factors in calculating your pension benefit, so it’s important to make sure you get credit for all your public service. You may be able to request additional service credit if you:
Worked for your current or another public employer before joining NYSLRS; or
Served in the U.S. Armed Forces and received an honorable discharge from active military duty.
Or you may be able to:
Transfer service: If you are still a member of another New York State public retirement system.
Reinstate service: If you withdrew your membership in NYSLRS or another New York State public retirement system.
You must submit your request before retirement, and you should do it as early in your career as possible. NYSLRS will need time to request records from your previous employer or retirement system, and requesting early also gives you time to pay for additional or reinstated service. Also, the sooner you purchase your credit, the less it will generally cost.
Pay Off Service Credit Purchases
If you requested additional service credit for previous public employment or military service and you received a cost letter, make sure you’re on track to pay off your service credit purchase before you retire.
You won’t receive credit for optional service that is not paid off when you retire.
If you are in the process of paying for mandatory service credit (for example, from a reinstated membership or if insufficient contributions were made to NYSLRS) and it’s not paid off by your date of retirement, your pension will be permanently reduced.
Sign in to Retirement Online to check your service credit purchase balance, make a lump sum payment or increase your payroll deduction amount.
Pay Off Your NYSLRS Loan
It’s important to understand the implications of retiring with an outstanding loan. Your pension will be permanently reduced, and 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% penalty.
To ensure you’re on track to pay off your loan before you retire, sign in to Retirement Online to check your balance, make a lump sum payment or increase your payroll deduction amount.
Estimate Your Pension
Finding out how much you can expect to receive is a critical step in preparing for retirement. Most members can estimate their pension using Retirement Online in just a few quick and easy steps.
Retirement Online uses your current earnings and service information to calculate your estimate, including your final average earnings (FAE) and the amounts for the pension payment options available to you. You can fine-tune your estimate or see how different choices would affect your benefit.
Remember, the amounts are estimates, not a guarantee of what you’ll receive when you retire.
Understand How Divorce May Affect Your Pension
In New York State, pensions and retirement benefits earned during the marriage may be marital property and can be divided when a marriage ends. Divorce can affect your pension and other retirement benefits in the following ways:
Your ex-spouse may be entitled to a portion of your pension.
You may be required to name your ex-spouse as the beneficiary of any death benefit.
You may be required to choose a pension payment option that provides a continuing benefit to your ex-spouse when you die.
Your ex-spouse may be entitled to a portion of your cost-of-living adjustment (COLA).
Any division of pension and retirement benefits must be stated in the form of a Domestic Relations Order (DRO)—a court order issued after a final judgment of divorce which specifies how benefits should be split.
It’s important to complete and submit your DRO to NYSLRS well before you apply for retirement to avoid changes or delays in your pension payments.
Check Your Eligibility for the Sick Leave Benefit
To be eligible for the Sick Leave Benefit, your employer must have adopted Section 41(j) of the Retirement and Social Security Law (RSSL) for ERS members or 341(j) of the RSSL for PFRS members. If your employer has chosen to offer this benefit, you may receive service credit for unused, unpaid sick leave at retirement.
To check if this benefit is available to you, ask your employer or sign in to Retirement Online and look for Sick Leave Eligibility.
To receive this benefit, you must retire directly from public service or within a year of leaving. The additional service credit for your unused, unpaid sick leave, up to a certain limit, will be added to your total years of service when calculating your pension benefit. However, it cannot be used to:
Qualify for vesting. For example, if you have four years and ten months of service credit and you need five years to be vested, your sick leave credit cannot be used to reach the five years.
Qualify for a better retirement benefit calculation. For example, if you have 19 ½ years of service credit but your pension calculation will improve substantially if you have 20 years, your sick leave credit cannot be used to reach the 20-year calculation.
Meet the service credit requirement for a special 20- or 25-year plan.
Increase your pension beyond the maximum allowed under your retirement plan.
Review Your Health Insurance Coverage
NYSLRS does not administer health insurance programs. When you’re nearing retirement, you should check with your employer’s human resources or personnel office or your health benefits administrator to determine your eligibility for health insurance coverage during retirement. If your former employer instructs us to do so, we will deduct health insurance premiums from your monthly pension payment, but NYSLRS cannot answer questions about coverage or changes in premium amounts.
If you are eligible to use your unused, unpaid sick leave to offset the cost of NYSHIP, payment towards your health insurance coverage will not affect your eligibility for the Sick Leave Benefit.
Schedule a Pre-Retirement Consultation
Before you apply for retirement, you may want to consider scheduling a pre-retirement consultation where you can speak with one of our representatives to review your benefits and ask any questions you may have.
Ready to Apply for Retirement?
When you’re ready, Retirement Online makes it fast and convenient to apply for retirement. There are no forms to mail in and nothing to have notarized. You’ll see an estimate of your pension, including the amounts for the pension payment options available to you. You’ll also be able to upload documents while applying or after submitting your application. And if you need to update your application, you can quickly and easily submit changes. But before applying, visit our Preparing and Applying for Retirement page for an overview of the retirement application so you know what to expect and what information you’ll need to submit.
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.
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.
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 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.
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.
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
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.
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.
As you plan for retirement, you need to think about your sources of income in retirement. However, you should also consider how long your retirement income will need to last.
Longer Life Span, Longer Retirement
These days, a 55-year-old man can expect to live for another 27.4 years, to about 82. A 55-year-old woman can expect to live for more than 30 years. These figures, derived from the Social Security life expectancy calculator, are only averages. They don’t account for factors such as health, lifestyle or family medical history.
Here are some other statistics worth considering as you plan for retirement (as of the State fiscal year that ended March 31, 2022):
More than 37,000 NYSLRS retirees were over 85 years old;
More than 3,500 had passed the 95-year mark; and
401 NYSLRS’ retirees were 101 or older.
Considering that many public employees can retire as early as 55, it’s possible that a fair number of them could have retirements that last 45 years or more.
Saving for a Long Retirement
Your NYSLRS pension is one source of income that you can depend on however long your retirement lasts. Employees’ Retirement System (ERS) members who retired in fiscal year 2022 are receiving an average monthly pension of $2,748. Social Security is another long-term source. The average Social Security benefit for a retired worker was $1,837 a month, as of June 2023.
Your retirement savings is a crucial asset that can supplement your pension and Social Security. In a long retirement, savings can help with rising costs and provide a source of cash in an emergency.
It is never too late to start saving for retirement. The New York State Deferred Compensation Plan is one easy way to get started. It’s a program created for New York State employees and employees of participating public agencies. If you’re a municipal employee, ask your employer if you’re eligible for the Deferred Compensation Plan or another retirement savings plan. (The New York State Deferred Compensation Plan is not affiliated with NYSLRS.)
You should also visit our Start Saving for Retirement page. You’ll find an example of how much you can save over a 30-year period, and a sample withdrawal strategy designed to provide retirement income for 20 years.
Whether you’re 22 or 52, you should be planning for retirement. Your NYSLRS retirement benefits will be based on your tier, years of service and final average earnings. For most members, age is also an important factor in your NYSLRS benefits and it’s a factor for Social Security and retirement savings strategies as well. So, as you plan for retirement, consider these age milestones.
Age Milestones
Under 50: It’s never too early to start saving for retirement. Even modest savings can add up over time as investment returns grow and interest compounds.
50: The Age 50 and Over Catch-Up provision allows you to save more pre-tax dollars in a retirement account starting in the calendar year in which you turn 50.
55: The earliest age most NYSLRS members can begin collecting a service retirement benefit. (This does not apply to members in special retirement plans.) Your pension may be permanently reduced if you retire before your full retirement age.
59½: The age you can start withdrawing money from a tax-deferred retirement savings plan, such as an IRA, without facing a potential federal tax penalty. (The penalty does not apply to New York State Deferred Compensation Plan savings if you are retired or have left public service.)
62: Full retirement age for your NYSLRS benefit if you are in Tier 2, 3, 4 and 5 or PFRS Tier 6. Earliest age you can begin collecting a Social Security pension, but the benefit would be reduced. For more information about Social Security, read When to Start Receiving Retirement Benefits.
63: Full retirement age for your NYSLRS benefit if you are in ERS Tier 6.
65: Age most people are eligible for Medicare benefits.
70: If you do not take your Social Security benefit, your benefit will increase each year until you reach age 70. Delaying Social Security after 70 will not increase your benefit.
73: Generally, if you have tax-deferred retirement savings and are no longer working, you must begin withdrawing some of this money when you reach a certain age. Under a recent change in federal law, you must start taking “minimum required distributions” at age 73. The minimum age had been 72, and the change does not affect those who turned 72 before the end of 2022. This age milestone will increase to 75 in 2033. Required minimum distributions do not apply to your NYSLRS retirement benefits.
One Last Number: Having a rough idea of your life expectancy is essential to retirement planning.
Tier 3 and 4 members in the Article 15 retirement plan qualify for retirement benefits after they’ve earned five years of credited service. Once you’re vested, you have a right to a NYSLRS retirement benefit — even if you leave public employment. Though your pension is guaranteed, the amount of your pension depends on several factors, including when you retire. Here is some information that can help you determine the right time to retire.
Three Reasons to Keep Working
Tier 3 and 4 members can claim their benefits as early as age 55, but they’ll face a significant penalty for early retirement – up to a 27 percent reduction in their pension. Early retirement reductions are prorated by month, so the penalty is reduced as you get closer to full retirement age. At 62, you can retire with full benefits. (Tier 3 and 4 Employees’ Retirement System (ERS) members who are in the Article 15 retirement plan and can retire between the ages of 55 and 62 without penalty once they have 30 years of service credit.)
Your final average earnings (FAE) are a significant factor in the calculation of your pension benefit. Since working longer usually means a higher FAE, continued public employment can increase your pension.
The other part of your retirement calculation is your service credit. More service credit can earn you a larger pension benefit, and, after 20 years, it also gets you a better pension formula. For Tier 3 and 4 members, if you retire with less than 20 years of service, the formula is FAE × 1.66% × years of service. Between 20 and 30 years, the formula becomes FAE × 2.00% × years of service. After 30 years of service, your pension benefit continues to increase at a rate of 1.5 percent of FAE for each year of service.
If You’re Not Working, Here’s Something to Consider
Everyone’s situation is unique. For example, if you’re vested and no longer work for a public employer, and you don’t think you will again, taking your pension at 55 might make sense. When you do the math, full benefits at age 62 will take 19 years to match the money you’d have received retiring at age 55 — even with the reduction.
An Online Tool to Help You Make Your Decision
Most members can use Retirement Online to estimate their pensions.
A Retirement Online estimate is based on the most up-to-date information we have on file for you. You can enter different retirement dates to see how those choices would affect your benefit, which could help you determine the right time to retire. When you’re done, you can print your pension estimate or save it for future reference.
If you are unable to use our online pension calculator, please contact us to request a pension estimate.
This post has focused on Tier 3 and 4 members. To see how retirement age affects members in other tiers, visit our About Benefit Reductions page.
Could retirement bring you too much free time? When people think about retirement planning, they usually think about money. Will you have enough to maintain a comfortable lifestyle for a retirement that could last decades? But regardless of your finances, there is one thing you’re likely to have a lot more of after you retire: time. Figuring out how you’ll spend that time should also be part of your retirement planning process.
Counting the
Hours
According to the U.S. Labor Department, the average American
worker spends about nine hours a day at work. Add another hour a day commuting
time, and that’s ten hours a day or 50 hours each week.
All those hours you spent working, and traveling to and from
work, will instantly become free time. While that may sound great to many
people, all that extra time can have downsides.
If not put to good use, that extra time can lead to boredom and even depression. What’s more, if you’re married and you and your spouse are both retired, you may find yourselves wondering how to spend that time together.
Make a Plan
for Free Time
For many couples, having extra time together is a dream come
true. However, some couples find themselves getting in each other’s way, and
that can sometimes lead to problems.
But there are ways to cope. For example, finding activities outside the home, both together and separately, can help. As with most things, you’ll be better off if you recognize there may be a problem, discuss it with your spouse, and come up with a plan.
If 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.
If 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