Tag Archives: Saving for Retirement

The 3-Legged Stool Approach to Retirement Confidence

As a NYSLRS member, your defined benefit pension plan is a good reason to be optimistic about your finances in retirement. Once you retire, your pension will provide monthly payments for the rest of your life. But there is more to a financially secure retirement than having a pension. Understanding all your potential sources of income will help you plan for your future and boost your retirement confidence.

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.

3-Legged Stool Approach to 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 NYSLRS pension payments will continue for the rest of your life, no matter how long you live. Unlike workers who rely on 401(k)-style retirement plans, you won’t have to worry about this income running out.

Most members can estimate their pension in Retirement Online. 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 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. (Pension benefits depend on your tier and retirement plan. Find your retirement plan publication to learn how your retirement benefit will be calculated.)

Leg 2: Social Security

Your Social Security benefit is another source of income to help support you in retirement. At Social Security’s full retirement age, your benefit can replace from about 75 percent for lower income earners to about 27 percent for higher income earners. Learn more about Social Security benefits  and visit the Social Security’s Plan for Retirement page to estimate your income.

Leg 3: Retirement Savings Can Boost Your Confidence

A lifetime pension and Social Security income will be substantial financial assets, but it’s still important to save for retirement. Healthy retirement savings will give you more flexibility to do the things you want to do in retirement. It can also help in case of an emergency and act as a hedge against inflation.

Your savings is the retirement factor you have the most control over. You decide when to start, how much to save and how to invest your money. 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.

Eligible employees might consider saving with the New York State Deferred Compensation Plan (NYSDCP). Money gets deducted from your paycheck, so you won’t even have to think about it. NYSDCP 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 whether you’re eligible for NYSDCP or another retirement savings plan.

National Retirement Security Month

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. Even if retirement seems far off, it’s never too early to start planning.

Retirement Security

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.

  • What is a Defined Benefit Plan?
    Your NYSLRS pension is a defined benefit retirement plan. When you retire, you’ll receive a guaranteed, lifetime benefit based on your earnings and years of service. A preset formula determines your benefit; it’s not limited to your accumulated contributions and investment returns, like with a 401(k)-style plan.  
  • The 3-Legged Stool Approach to Retirement Confidence
    Think of your retirement security as a three-legged stool. Each leg represents a different income source that supports you in retirement. The first leg of the stool is your NYSLRS pension, and the second is your Social Security benefit. The third leg is your own personal savings, which can help provide security in retirement and give you more freedom to do the things you want to do.
  • Compounding: A Great Way for Your Money to Grow
    The sooner you start saving, the better—especially if you invest in a retirement savings plan that reinvests the returns you earn. Such compounded savings increase in value by earning interest on both the principal and accumulated returns. But for your money to make more money in this way, it needs time to grow.
  • Deferred Compensation: Another Source of Retirement Income
    Deferred compensation plans are voluntary retirement savings plans like 401(k) or 403(b) plans designed and managed with public employees in mind. You can contribute as little as 1 percent of your earnings—automatically deducted from your paycheck. Deferring income from your take-home pay may mean less money to spend in the short-term, but it’s an easy way to start saving extra for retirement.
  • Give Your Retirement Savings a Boost
    Once you’ve started saving for retirement, you may want to look for ways to increase how much you save. Even small increases can make a big difference over time—and may have a minimal impact on your take-home pay.

Remember, retirement security doesn’t just happen—it takes planning.

Visit our Retirement Planning page for more information about your NYSLRS pension, including a calculator to estimate your monthly payments and a tool to help you find your retirement plan publication for a complete description of your benefits.

The 3-Legged Stool: An Approach to Retirement Confidence

As a NYSLRS member, your defined benefit pension plan is a good reason to be optimistic about your finances when you retire. Your pension will provide you with monthly payments for the rest of your life. But there is more to a financially secure retirement than having a pension. Understanding your potential sources of income will help you plan for your future and boost your retirement confidence.

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.

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 NYSLRS pension provides you with 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 this income 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 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. (Pension benefits depend on your tier and retirement plan. Look up your retirement plan publication to find out how your retirement benefit will be calculated.)

Leg 2: Social Security

Your Social Security benefit is another source of income to help support you in retirement. It replaces a percentage of your pre-retirement income. At full retirement age, your social security benefit can replace from about 75 percent for lower income earners to about 27 percent for higher income earners. Visit Social Security’s Plan for Retirement page to estimate your income and learn more about your benefit.

Leg 3: Retirement Savings Can Boost Your Confidence

A lifetime pension and Social Security income will be substantial financial assets, but it’s still important to save for retirement. A healthy retirement savings will give you more flexibility during retirement, helping to ensure that you’ll be able to do the things you want to do. It can also help in case of an emergency and act as a hedge against inflation.

Saving is the retirement factor you have the most control over. You decide when to start, how much to save and how to invest your money. 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.

Eligible employees might consider saving with the New York State Deferred Compensation Plan (NYSDCP). Money gets deducted from your paycheck so you won’t even have to think about it. NYSDCP 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 whether you’re eligible for NYSDCP or another retirement savings plan.

Age Milestones for Retirement Planning

age milestones

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.

What to Consider When Choosing Your Retirement Date

Before you pin down a retirement date, there are several factors you should consider.

Your Retirement Date

NYSLRS has made it a lot easier for you to determine the best time to retire. Most members can now use our online pension calculator to estimate what your benefit would be at different retirement dates and ages. Just sign in to your Retirement Online account and click the “Estimate my Pension” button to get started.

As of April 9, 2022, Tier 5 and 6 members only need five years of service credit to be vested. If you are a Tier 5 or 6 member with five or more years of service credit you can contact us to request a benefit estimate.

choosing your retirement date

Your Health

Your current health and long-term health prospects should be a factor in choosing your retirement date. If your health is poor, you may want to retire earlier to give yourself more time to enjoy retirement. On the other hand, if you anticipate significant out-of-pocket health costs, working longer might give you more time to save for those costs.

If you are in good health, your retirement may last longer than average. In most cases, staying on the job a little longer will increase your NYSLRS pension and provide an opportunity to build your savings.

Your Savings

It’s always a good idea for members to plan to supplement their NYSLRS pension and Social Security with savings. Retirement savings are a hedge against inflation, can help in an emergency and give you more freedom to do the things you want to do in retirement.

Having retirement savings gives you more flexibility and — if you have enough saved — may offset any penalty if you decide to retire early. On the other hand, if you have no savings or are short of what you’d like to have, working a little longer offers a chance to save more.

State employees and some municipal employees can take advantage of the New York State Deferred Compensation PlanIn 2022, you can save up to $20,500 per year in a Deferred Compensation account, under Internal Revenue Service rules. Starting in the year you turn 50, you can save an additional catch-up amount. The age 50-plus catch-up amount for 2022 is $6,500.

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. (The Deferred Compensation Plan is not affiliated with NYSLRS.)

Your Current Job

The type of work you do is an important factor in determining when to retire. A physically demanding job can get even harder as you age.

But there are other things to consider about your current job. Some members want to retire as soon as they’re eligible to go. However, if your job gives you satisfaction and a sense of purpose, are you ready to walk away from it? Do you look forward to social interactions with your coworkers? Will you miss your job more than you enjoy being retired?

Your Plans for Retirement

Is retirement the end of something or the beginning of something new? Answering that question could go a long way toward determining your ideal retirement date. If you have dreams of starting your own business or going mountain climbing in Spain, you may not want to delay retirement.

On the other hand, if you don’t have a plan to fill the long hours of retirement, you risk becoming bored or depressed. For some, that risk is a reason to keep working. Whether you decide to retire earlier or later, having a plan for retirement can help make it a more satisfying experience.

Deferred Compensation:
Another Source of Retirement Income

Many financial experts say that you will need 70 to 80 percent of your pre-retirement income to maintain your standard of living once you retire. For NYSLRS members, a financial plan in retirement is likely to include your NYSLRS pension and Social Security benefits. For greater financial stability, it may make sense to supplement your retirement with personal savings such as a deferred compensation plan.

deferred compensation

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. The New York State Deferred Compensation Plan (NYSDCP) is the 457(b) plan created for New York State employees and employees of other participating public employers in New York.

Once you sign up for the NYSDCP, you can build your own investment portfolio or invest in established investment funds. Your contributions will be automatically deducted from your paycheck, and you can contribute as little as 1 percent of your earnings.

One option for a deferred compensation plan is a tax-deferred account, where you make contributions with pre-tax money. This way, you won’t have to pay State or federal taxes on your contributions and earnings until you start making withdrawals. Your employer also may offer the option for a Roth account, where you make contributions with after-tax money. With a Roth account, you won’t pay taxes on withdrawals in retirement. Find out more about both options.

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.

You can enroll in a deferred compensation plan anytime — whether you’re approaching retirement or you just started working. Usually, the sooner you start saving, the better prepared you’ll be for retirement.

The Right Time to Start Saving for Retirement is Now

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.

Saving for Retirement

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.)