Tag Archives: retirement planning

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.

Retirement and your credit score

Retirement and Your Credit Score

Throughout your working years, you strived to maintain good credit. But if you’re retired, or about to retire, is a good credit score that important? The answer is yes, according to many financial experts.  You don’t want to be burdened with debt in your retirement years, but you may need to get a get a car loan or refinance a mortgage. A good credit score will assure you can borrow the money at a decent interest rate.

But your credit score can affect you even if you don’t borrow money. A bad credit score could prevent you from landing a job or renting an apartment. It could even force you to pay higher insurance premiums.

Fortunately, maintaining a good credit score is not that difficult. In most cases, it’s a matter of continuing what you’ve already been doing.
Retirement and your credit score

How to Maintain a Good Credit Score

  • Pay your bills on time. Your payment history accounts for about a third of your credit score.
  • Don’t max out your credit cards. The ratio of debt to available credit is also a big factor. If all your credit cards have balances near the limit, your credit score will suffer.
  • Don’t close credit card accounts you’ve had for a long time. These accounts show your long history of being responsible with credit, helping to boost your score.
  • Charge something. Getting off the credit grid entirely can hurt your rating. So use a credit card regularly for some purchases. If you pay off the balance each month, you’ll avoid interest.
  • Check credit reports. Even if you’re doing everything right, misinformation in the files of credit rating companies can hurt your credit. (And, no, requesting a credit report will not hurt your credit score.)

Things like age and salary are not part of the credit score equation, so being retired does not hurt your score.  However, lenders do take income into account when you apply for a loan, so you may find it harder to borrow after retirement, even if you have good credit.

Checking Credit Reports

Under federal law, the three nationwide credit reporting companies are required to provide you with a free credit report once every 12 months. But you must request it. You can do it online at www.annualcreditreport.com or by calling 1-877-322-8228. (AnnualCreditReport, a website maintained by the three major credit reporting agencies, is the only free-credit-report site authorized by the federal government. Beware of impostor sites.)

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.

Now is a Good Time to Review Your Retirement Savings

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

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

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

Review Your Retirement Savings

Why Save for Retirement?

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

Getting Started

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

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

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

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

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.

A Good Plan Can Ease Transition to Retirement

When people talk about retirement planning, they’re usually talking about money. But there is another aspect that people often forget. What will you do with all that newfound free time?

Sure, after decades of hard work, thoughts of sleeping late and taking it easy seem pretty good. But retirement is a big transition, and many retirees don’t consider its potential psychological consequences.

steps to ease transition to retirement

Create a Plan and Schedule

While you may have some complaints about your job, it is an important part of your life. It helps define who you are and can give you a sense of accomplishment. It provides structure, mental stimulation and social interaction. Leaving the workforce creates a big void, and watching daytime TV or frequent trips to the grocery store may not be enough to fill that void. Empty or aimless hours can lead to boredom, disenchantment and even depression.

You may have a long list of things to do, places to go, books to read, but it won’t mean much if you don’t act. To successfully manage your time, you’ll need to actively plan and create a schedule. Set down how you will spend each day of the week, blocking out time for chores, social engagements, hobbies and exercise. Sticking to a schedule will give your days structure and give you a sense of purpose.

Stay Active and Engaged

For most people, staying busy and remaining socially engaged are essential to a satisfying retirement. That’s why some retirees go back to work full-time, while others opt for part-time or seasonal jobs.

But a retirement job doesn’t necessary mean continuing to do the same old thing. Retirement is an opportunity to reinvent yourself. Do something you’ve always wanted to do, something fun and challenging.

Hopefully, you’ve planned your retirement so you won’t need to work to meet basic needs, so your retirement gig won’t have to pay a lot. In fact, maybe the job for you is one that doesn’t pay at all, at least monetarily. There are countless organizations looking for volunteers, so it shouldn’t be hard to find opportunities that match your skills and interests.

Volunteering just a few hours a week will give you something to look forward to and keep you connected to the outside world. And studies show that it can improve both your mental and physical well-being.

Exercise Your Body and Brain

Regular exercise not only keeps you physically fit, it also increases your sense of well-being. Whatever you do to get exercise, make it part of your regular schedule. Consider taking a fitness class at a local gym, which also adds a social element to your workout. (And you can up the ante by trying something new, like a martial arts class.)

Don’t forget to exercise your brain. A course or workshop can help you discover a new side to yourself (the painter, the mystery writer, the master of topiary). You may want to enroll in classes at a local community college or even return to school full-time.

Whatever you do, make sure it’s part of a plan – a plan for a happier retirement.

Infographic regarding spending habits

Spending Changes in Retirement

Just like starting your first job, getting married or having kids, retirement will change your life. Some changes are small, like sleeping in or shopping during regular business hours. Others, however, are significant and worth examining ahead of time… like how much you’ll be spending in retirement each month or each year.

An Employee Benefit Research Institute (EBRI) study offers some good news for prospective retirees. Household spending generally drops at the beginning of retirement — by 5.5 percent in the first two years, and by 12.5 percent in the third and fourth years. (Although, nearly 46 percent of households actually spend more in the first two years of retirement.)

Analysis from the Bureau of Labor Statistics in the U.S. Department of Labor seems to support the research from EBRI. In “A closer look at spending patterns of older Americans,” the author analyzed data from the 2014 Consumer Expenditure Survey, and she also found a progressive drop in spending as age increases. (Income declines with age as well.)

While data supporting EBRI’s study is helpful, it turns out that the highlight of the Consumer Expenditure Survey results is a detailed look at how the things we spend our money on change as we grow older.

Infographic regarding spending habits

As interesting as that is, it’s just a general look at how older Americans are managing their money. What really matters is: How will you spend your money once you retire?

Prepare a Post-Retirement Budget

Like a fiduciary choir, financial advisors all sing the same refrain: Start young; save and invest regularly to meet your financial goals. If you do, the switch from saving to spending in retirement can be easy.

But, in order to make that transition, you need a budget.

The first step toward a post-retirement budget is a review of what you spend now. For a few months, track how you spend your money. Don’t forget to include periodic costs, like car insurance payments or property taxes. By looking at your current spending patterns, you can get an idea of how you’ll spend money come retirement.

Then, consider your current monthly income, and estimate your post-retirement income. If your post-retirement income is less than your current income, you might want to plan to adjust your expenses or even consider changing your retirement date.

We have monthly expense and income worksheets to help with this exercise. You can print them out and start planning ahead for post-retirement spending.

Monthly budgeting worksheets (PDF)

Monthly Worksheets (PDF)

For those of you who carry smart phones, Forbes put together a list of popular apps for tracking your daily spending. All of them are free, though some do sell extra features. Many of them can automatically pull in information from your bank and credit card accounts, but if you’d rather avoid that exposure or if you use cash regularly, you may prefer an app that lets users enter transactions manually.