Tag Archives: Retirement Savings

Age Milestones for Retirement Planning

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.

66: Full retirement age for Social Security if you were born from 1943 through 1954. Add two months for each year from 1955 through 1959.

67: Full retirement age for Social Security if you were born in 1960 or later.

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.

Welcome, New Members

4 Replies

Welcome new members to the New York State and Local Retirement System (NYSLRS).

What is NYSLRS? NYSLRS administers retirement benefits for New York State employees and municipal and non-teaching school district employees outside of New York City. With nearly 1.2 million members, retirees and beneficiaries, NYSLRS is one of the largest public retirement systems in the nation.

NYSLRS is here to help you plan a financially secure retirement. Retirement may seem like a distant concern, but decisions you make now will have a big impact on your post-work life. Here are a few things you should do now as a new member:

Checklist for New Members

Learn About Defined Benefit Plans

Your NYSLRS pension is a defined benefit plan. This means that, once you are eligible and apply for retirement, you are guaranteed a monthly pension payment for the rest of your life. The amount of your payments will be calculated using a formula set by State law.

Defined benefit plans should not be confused with 401(k)-style retirement savings plans, which are known as defined contribution plans. The value of these plans is limited to the contributions made to an individual’s account and the investment returns on those contributions. And, unlike your NYSLRS pension, these plans do not guarantee a lifetime benefit.

While a 401(k)-style retirement savings plan can supplement a pension and Social Security benefits, it does not provide the same level of financial security as a defined benefit plan.

Sign Up for Retirement Online

If you haven’t already, sign up for a Retirement Online account. You can use Retirement Online to look up your estimated total service credit, name a beneficiary for your death benefit, purchase past service credit and more. This online tool will be an important resource throughout your career, especially as you plan for retirement when you can use our benefit calculator to estimate your pension.

Find Your Retirement Plan Publication

Your retirement plan publication is an essential resource that provides comprehensive information about your NYSLRS benefits. You can look up your specific plan using our Find Your NYSLRS Retirement Plan Publication tool. All you need is your benefit plan code and Tier, which you can find in Retirement Online.

Designate a Beneficiary

Your retirement plan provides you with a death benefit, so it’s important that you designate a beneficiary or beneficiaries. You can designate a beneficiary or beneficiaries through Retirement Online or by mailing us a Designation of Beneficiary form (RS5127).

Understand Service Credit

Your NYSLRS pension will be based on factors such as your tier, retirement plan, age at retirement, final average earnings and your service credit. You’ll earn one year of service credit for every year of full-time employment with a participating employer. Part-time employment is prorated. If you worked for a public employer or served in the U.S. armed forces before you were a member of NYSLRS, you may be eligible to receive credit for that past service. Because it is a major factor in calculating a NYSLRS pension, additional service credit would increase your pension in most cases. You can request this service through Retirement Online or by mailing us a Request to Purchase Service Credit (Including any Military Service) form (RS5042).

Start Saving for Retirement

Your pension is only one part of a secure financial future. It’s a good idea to save additional money for retirement. Healthy retirement savings will give you more flexibility to do the things you want to do in retirement. They also can be a hedge against inflation and a source of cash in an emergency. You don’t want to wait to start saving; the sooner you do, the more time your money has to grow.

More Information

Visit our Welcome New Members page for more information about NYSLRS and your benefits.

Supplement Your NYSLRS Pension With Retirement Savings

8 Replies

Do you have a retirement savings account? If you’re a new NYSLRS member, your future pension could provide a significant portion of your retirement income, but it’s also a good idea to save for retirement to supplement your pension and Social Security.

Why Should You Save for Retirement?

Retirement savings can be an important financial asset when you retire. Savings can enhance your retirement lifestyle and give you the flexibility to do the things you want.

Your savings can provide money for traveling, continuing your education, pursuing a hobby or starting a business. The money you set aside can be a resource in case of an emergency, act as a hedge against inflation and boost your retirement confidence.

Setting a Retirement Savings Goal

How much to save is a personal decision, but here are some things to consider.

Financial advisers recommend that people save 10 to 15 percent of their gross earnings throughout their careers to be able to retire comfortably. But that advice is aimed at people with defined contribution retirement plans, such as a 401(k), as their main source of retirement income.

As a NYSLRS member, you’re part of a defined benefit plan, also known as a traditional pension plan. Your pension, based on your years of service and earnings, will provide a lifetime benefit. That benefit could replace a substantial portion of your earnings during retirement.

Having a pension means you may not need to save as much as someone with only a 401(k). If you’re just starting out in your career, you may want to pick a savings amount (or percentage of your earnings) you’re comfortable with. Use a retirement savings calculator to see how much your savings plan could yield over time or test the results of different savings amounts.

Here you can see potential savings results of someone who invests 50 dollars every two weeks over 30 years. While the stock market has been turbulent lately, stock values tend to rise. Over the long term, stock market returns average about 10 percent a year.

As you get closer to retirement, you should develop a plan to withdraw money from your retirement savings. A withdrawal plan will give you a better grasp of the income you can expect from your nest egg.

Here is one possible withdrawal strategy, which was designed to provide 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 has today. However, while inflation has been high in recent months, it does cycle and has been much lower in the past.

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

How To Get Started

State employees and many municipal employees are eligible to save for retirement through the New York State Deferred Compensation Plan. Once you’ve signed up for the plan, your retirement savings (which may be tax-deferred, depending on your plan) will be automatically deducted from your paycheck. (The Deferred Compensation Plan is not affiliated with NYSLRS.)

Find out if your employer participates in the Deferred Compensation Plan. If they don’t, check with your employer’s human resources (personnel) office about other savings options you may be eligible for.

More Information About Retirement Savings

You can find more information about saving for retirement in these recent posts:

ERS Tier 6 Benefits – A Closer Look

24 Replies

Financial advisers say you will need to replace between 70 and 80 percent of your salary to maintain your lifestyle after retirement. Your NYSLRS pension could go a long way in helping you reach that goal, especially when combined with your Social Security benefit and your own retirement savings. Here’s a look at how Employees’ Retirement System (ERS) members in Tier 6 (who are vested once they’ve earned five years of credited service), can reach that goal. Members who joined NYSLRS since April 1, 2012 are in Tier 6.

formula for a financially secure retirement

Calculating an ERS Tier 6 Member’s Pension

Your NYSLRS pension will be based on your Final Average Earnings (FAE) and the number of years you work in public service. FAE is the average of the five highest-paid consecutive years. Note: The law limits the FAE of all members who joined on or after June 17, 1971. For example, for most members, if your earnings increase significantly through the years used in your FAE, some of those earnings may not be used toward your pension.

Although ERS members can generally retire as early as age 55 with reduced benefits, the full retirement age for Tier 6 members is age 63.

For ERS Tier 6 members in regular plans (Article 15), the benefit is 1.66 percent of your FAE for each full year you work, up to 20 years. At 20 years, the benefit equals 1.75 percent per year for a total of 35 percent. After 20 years, the benefit grows to 2 percent per year for each additional year of service. (Benefit calculations for members of the Police and Fire Retirement System and ERS members in special plans vary based on plan.)

Say you begin your career at age 28 and work full-time until your full retirement age of 63. That’s 35 years of service credit. You’d get 35 percent of your FAE for the first 20 years, plus 30 percent for the last 15 years, for a total benefit that would replace 65 percent of your salary. If you didn’t start until age 38, you’d get 45 percent of your FAE at 63.

Examples of ERS Tier 6 Pension Calculation

So, that’s how your NYSLRS pension can help you get started with your post-retirement income. Now, let’s look at what the addition of Social Security and your own savings can do to help you reach your retirement goal.

Taxes After Retirement

53 Replies

Estimating your post-retirement expenses is crucial to effective retirement planning, and it’s important to remember that taxes are also part of that equation. Most retirees pay less in taxes than when they were working, partly because their incomes are lower. But there are other reasons why your tax burden may be lighter after you stop working.

New York State Taxes

As a NYSLRS retiree, your pension will not be subject to New York State or local income tax. New York doesn’t tax Social Security benefits, either.

You may also get a tax break on any distributions from retirement savings, such as deferred compensation, and benefits from a private-sector pension. Find out more on the Department of Taxation and Finance website.

Be aware that you could lose these tax breaks if you move out of New York. Many states tax pensions, and some tax Social Security. For information on tax laws in other states, visit the website of the Retired Public Employees Association.

Federal Taxes

Unfortunately, most of your retirement income will be subject to federal taxes, but there are some bright spots here.

Your Social Security benefits are likely to be taxed, but at most, you’ll only pay taxes on a portion of your benefits. You can find information about it on the Social Security Administration website. (If you’re already retired, use the Social Security Benefits Worksheet in the Form 1040 instructions to see if any of your benefits are taxable.)

Throughout your working years, you’ve paid payroll taxes for Social Security and Medicare. For most workers, that’s 6.2 percent (Social Security) and 1.45 percent (Medicare) of your gross earnings out of every paycheck. But Social Security and Medicare taxes are only withheld from earned income, such as wages. Pensions, Social Security benefits and retirement savings distributions are exempt from Social Security taxes. Of course, if you get a paying job after retirement, Social Security and Medicare taxes will be deducted from your paycheck.

Once you turn 65, you may be able to claim a larger standard deduction on your federal tax return.

To better understand how your retirement income will be taxed, it may be helpful to speak with a tax adviser.

Ten Things Every NYSLRS Member Should Know

2 Replies

There’s a lot to know about being a NYSLRS member, and sometimes it can feel overwhelming learning about your retirement benefits when you join or when you’re getting ready to retire. That’s why we’d like to focus on ten things that are important to all our members.

Your retirement benefits are guaranteed by the State Constitution. Under Article 5, Section 7, your pension cannot be “diminished or impaired.”
You are part of a defined benefit pension plan. A defined benefit plan provides a lifetime benefit at retirement based on earnings and years of service.
The Pension Fund, the pool of money your retirement benefits will be paid from, is safe and secure. It has been widely recognized as one of the best-funded and best-managed public pension funds in the nation.
Your retirement plan booklet contains a wealth of information about your benefits.
Your tier determines your eligibility for benefits and how those benefits are calculated.
Becoming vested is a key milestone in every NYSLRS member’s career. Once you’re vested, you’ll be eligible for a pension even if you leave public employment before retirement age.
Your final average earnings (FAE) is a major factor in calculating your NYSLRS pension, rather than being dependent on the contributions you make toward retirement.
You can estimate your pension online. Most members can use Retirement Online to create a benefit estimate based on information we have on file for them. (And if you can’t use this calculator, we have alternatives for you.)
You can stay informed about your benefits with Retirement Online. Creating an account is easy, and in many cases, you can use Retirement Online instead of sending in forms or calling NYSLRS.
Retirement savings can supplement your pension and Social Security and give you more flexibility in retirement. The sooner you start, the more time you have to grow your savings.

Already retired? Read our blog post, Ten Things Every NYSLRS Retiree Should Know.

Give Your Retirement Savings a Boost

10 Replies

If you’re already building your retirement savings, you already understand how those savings, along with Social Security, work together with your pension to help provide financial stability in retirement. Financial advisors call this the “three-legged stool.”

But why not take it a step further and give your retirement savings a boost? Even a small increase could make a big difference over time, while having minimal impact on your take-home pay.

How much of a difference would it make? You can check it out yourself using this online calculator and your own salary and savings information. Calculate the impact of your current savings, then try the same calculation with an additional 1 percent of your earnings. For example, if you’re saving 5 percent of your pay, see what saving 6 percent would do by the time you expect to retire.

Impact on Your Paycheck

Fortunately, adding a small amount to your retirement savings won’t have a substantial impact on your paycheck. For example, if you’re making $60,000 a year, 1 percent is only $600. That’s just $50 a month or, if you are paid every other week, about $23 per payday.

The impact on your take-home pay would be even less if you save in a tax-deferred plan because you won’t have to pay income tax on those earnings until after you retire. The New York State Deferred Compensation Plan’s paycheck impact calculator can help you estimate how increased savings would affect your paycheck. (You don’t have to have a Deferred Compensation account to use their calculator. The New York State Deferred Compensation Plan is not affiliated with NYSLRS.)

When to Increase Retirement Savings?

The sooner you boost your savings, the better off you’ll be. But if you’re not ready to increase your savings right now, then try this: Schedule your increase to coincide with your next raise. That way, you may not even miss the money.

Are You Prepared for a Long Retirement?

2 Replies

We all look forward to a long, happy and financially secure retirement. But as you plan ahead for retirement, “how long?” is an important question to ask.

Longer Life Span, Longer Retirement

People are living longer. A 55-year-old man can expect to live for another 27 years, to about 82. A 55-year-old woman can expect to live for another 30 ½ years. These figures, derived from the Social Security life expectancy calculator, are only averages. They don’t take into account such factors as your health, lifestyle or family medical history.

Here are some other statistics that are worth pondering as you plan for retirement: more than 37,000 current NYSLRS retirees are over 85, and more than 3,400 have passed the 95 mark. In fact, in the State fiscal year that ended in March 2020, 375 NYSLRS’ retirees were 101 or older. Considering that many public employees retire at 55, it’s possible that a fair percentage of them could have retirements that last 45 years or more.

preparing for a long retirement - how long can we expect to live

Making Your Savings Last

As you plan for a long retirement, you need to ask yourself, will I have enough money to maintain a comfortable lifestyle for decades to come?

Employees’ Retirement System (ERS) members who retired in fiscal year 2020 are receiving an average monthly pension of $2,656. The average Social Security benefit for a retired worker was $1,544, as of December 2020.

Your retirement savings are also crucial assets that can supplement your pension and Social Security. Savings are a hedge against inflation, can help in an emergency and provide flexibility over a long retirement.

If you have no retirement savings, it is never too late to start. An easy way to get started is through the New York State Deferred Compensation Plan, a retirement savings 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.)

After you retire, you’ll need to manage your retirement savings wisely to ensure your money lasts. You may find this savings withdrawal calculator helpful.

NYSLRS is Here for You

Your NYSLRS pension is a lifetime benefit that will provide monthly payments throughout your retirement. Get a head start on your retirement planning by getting a pension estimate. Most members can get an estimate by using our online benefit calculator.

The 3-Legged Stool: An Approach to Retirement Confidence

7 Replies

Most American workers believe they will have enough money to live comfortably after they retire, but do you share their retirement confidence?

As a NYSLRS member with a defined benefit pension plan, you have reason to be optimistic about retirement. But there is more to a financially secure retirement than having a pension. Think of retirement security as a three-legged stool, with three parts working together to provide financial stability when your working days are over. Understanding each of these sources of income will help you better plan for your future and boost your retirement confidence.

Leg 1: Your NYSLRS Pension

At retirement, vested NYSLRS members are eligible for a pension based on their final average earnings and the number of years they’ve worked in public service. Your pension is a lifetime benefit, which means you’ll receive a monthly payment for the rest of your life, no matter how long you live. Unlike workers who rely on a 401(k)-style retirement plan, you won’t have to worry about your money running out.

Most members can use Retirement Online to estimate how much their pension will be. But if you’re a long way from retirement, it may be better to think in terms of earnings replacement. Financial advisers estimate you’ll need to replace 70 to 80 percent of your income to retire with financial confidence. Your pension can help get you there. For example, if you retire with 30 years of service, your NYSLRS pension could replace more than half of your earnings. (Replacement percentages vary among retirement plans. You can find out more in your retirement plan booklet.)

Leg 2: Social Security

Less than half of Americans believe Social Security will be there for them when they retire, according to a recent poll, and younger workers are even more pessimistic about Social Security’s future. While there’s no denying that Social Security faces challenges, things aren’t as bleak as some people think.

Social Security trustees estimate that Social Security reserves will be depleted by 2035 and they will only be able to pay about 76 percent of scheduled retirement benefits. But consider this: Social Security now replaces about 36 percent of the wages of a typical worker who retires at full retirement age. In the future, even if it only replaces 25 to 30 percent of pre-retirement earnings, it would still be a significant source of retirement income.

But these are worse case scenarios. The truth is that lawmakers have many policy options that could reduce or eliminate the long-term financing shortfalls in Social Security. It seems likely those options will be explored.

Leg 3: Retirement Savings

Having a secure, lifetime pension will be a substantial financial asset, but it’s still important to save money for retirement. A retirement nest egg can help in case of an emergency, act as a hedge against inflation and boost your retirement confidence.

Saving is the retirement factor you have the most control over. You decide when to start, how much to save and how your money will be invested. The key is to start saving early, so your money has time to grow, even if you can only afford to save a small amount in the beginning.

With the New York State Deferred Compensation Plan, you can start out by saving as little as $10 per pay period. That money would be automatically deducted from your paycheck, so you won’t even have to think about it. The money is tax-deferred, which means you don’t pay income taxes on your Plan account contributions or earnings until you begin to take payments from your account. This may lower your taxable income now and in retirement. The Deferred Compensation plan is not affiliated with NYSLRS, but New York State employees and some municipal employees can participate. If you’re a municipal employee, ask your employer if you’re eligible for the Deferred Compensation Plan or another retirement savings plan.

The Right Time to Start Saving for Retirement is Now

2 Replies

When should you start saving for retirement? If you aren’t saving already, right now is the best time to start. If your retirement is a long way off, that means you’ll have more time for your savings to grow. But even if you’re close to retirement, it is never too late to start saving.

Why Save for Retirement?

While retirees tend to spend less than they did while they were working, financial experts say you’ll still need 70 to 80 percent of your pre-retirement income to maintain your lifestyle during retirement.

NYSLRS members have the rare advantage of a well-funded, defined-benefit pension. As a NYSLRS member, once you’re vested, you’re entitled to a pension that, once you retire, will provide you with monthly payments for the rest of your life. Retirement savings can supplement your NYSLRS pension and Social Security, helping you reach that income-replacement 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. It can also provide peace of mind.

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 don’t work for New York State, check with your employer to see if you are eligible. If you are not eligible, your employer may be able to direct you to an alternative retirement savings program.

Once you sign up for Deferred Compensation, 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. (The Deferred Compensation Plan is not affiliated with NYSLRS.)

New York Retirement News

News from the New York State and Local Retirement System

Tag Archives: Retirement Savings

Welcome, New Members