Tag Archives: savings

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.

Financial Literacy and Retirement

April is National Financial Literacy Month, a time dedicated to helping people make informed financial decisions and manage money effectively. Financial literacy means understanding and using skills such as budgeting, investing and managing your personal finances.  

Greater financial literacy generally translates into greater financial well-being, according to a recent report from the TIAA Institute-GFLEC Personal Finance Index. TIAA’s research also finds a connection between financial literacy and saving for retirement.

Financial Literacy and Retirement

Financial Literacy and Planning for Retirement

Increase your financial literacy and make a good plan for retirement by understanding your NYSLRS benefits, your other sources of retirement income and your current financial situation. Once you know where you stand, you’ll be in a better position to plan.

Understand Your NYSLRS Benefits

As a NYSLRS member, you are enrolled in a defined benefit plan, also known as a traditional pension plan. If you are vested and retire from NYSLRS, you will receive a monthly pension payment for the rest of your life. Your pension will be calculated using a formula based on your earnings and years of service, your retirement plan, and your tier. 

Find your retirement plan publication for comprehensive information about the benefits you are entitled to receive as a member of the Employees’ Retirement System (ERS) or the Police and Fire Retirement System (PFRS).

Depending on your tier and retirement plan, certain membership milestones will affect how your pension is calculated and how much you’ll receive at retirement. Read our milestones blog posts for general information about the retirement plans that cover most NYSLRS members:

Consider Other Sources of Retirement Income

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.

The formula for a financially secure retirement

Retirement savings can be an important financial asset when you retire. Savings can provide money for you to travel, continue your education, pursue a hobby or start a business. The money you set aside can also be a resource in case of an emergency, act as a hedge against inflation and boost your retirement confidence.

Evaluate Your Current Financial Situation

Estimate Your Retirement Income

An estimate of your NYSLRS pension benefit is essential for effective retirement planning. Most members can create their own estimate in minutes using Retirement Online. Your estimate will be based on the most up-to-date account information we have on file for you. You can enter different retirement dates to see how those choices would affect your benefit.

There are also a variety of online calculators that can help you estimate the retirement income you might expect from Social Security or personal retirement savings.

Create a Budget

Use our Monthly Income & Expenses Worksheets to help you track your current spending habits and project your future needs. Remember to account for non-monthly expenses, such as car insurance, property taxes and school taxes.

Pay Down Your Debt

If you’re planning to retire soon, it’s a good idea to take inventory of any debt you owe. Debt is not necessarily bad but paying it down can give you more flexibility to enjoy the type of retirement you want.

Supplement Your NYSLRS Pension with Retirement Savings

Your NYSLRS pension can provide a significant portion of your retirement income, but it’s also a good idea to supplement your pension and Social Security with a retirement savings account.

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 you to travel, continue your education, pursue a hobby or start a business. The money you set aside can also be a resource in case of an emergency, act as a hedge against inflation and boost your retirement confidence.

Set a Retirement Savings Goal

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

Financial advisers often recommend saving 10 to 15 percent of your gross earnings throughout your career to retire comfortably. However, that advice is aimed at people with 401(k)-style defined contribution retirement plans 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. You can estimate your pension in Retirement Online to get an idea of the income it will provide in retirement.

Having a pension means you may not need to save as much as someone with only a 401(k). Use a retirement savings calculator to see how much a retirement savings plan could yield over time, or test the results of different savings amounts.

Below you can see potential savings results of someone who invests 50 dollars every two weeks over 30 years. While the stock market can be turbulent over the long term, stock market returns average about 10 percent a year.

Saving for Retirement

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 idea of the income you might 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 recently, it does cycle and has been lower in the past.

Withdrawing from Retirement Savings

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

Deferred Compensation – A Way to Save

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, 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.)

Check with your employer’s human resources or personnel office to see if they participate in the Deferred Compensation Plan or if they offer other savings options.

Read More About Retirement Savings

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

Crunching the Numbers: A Short Guide to Retirement Calculators

A good estimate of your post-retirement income is essential for effective retirement planning. But gauging your income can be tricky when it comes from multiple sources. Fortunately, there are a variety of online calculators that can help you get started.

online calculators for retirement planning

NYSLRS Benefit Calculator

Most NYSLRS members can quickly create a pension estimate using Retirement Online. Your estimate will be based on the most up-to-date account information we have on file for you. You can enter different retirement dates to see how those choices would affect your benefit and adjust your earnings or service credit if you anticipate a raise or plan to purchase past service.

Social Security Calculators

The Social Security Administration (SSA) hosts several calculators that you may find helpful. Their Quick Calculator uses information you enter to provide a rough Social Security benefit estimate. Their Retirement Estimator calculates your benefit based on your actual earnings. You’ll need to enter your Social Security number and other personal information to create an SSA account. 

You can also look up when you will be eligible for full Social Security benefits and estimate your life expectancy.

Savings Calculators

If you are saving for retirement, a simple savings calculator can give you an idea of how your money can grow over the years. However, simple calculators like this assume a fixed amount of savings each month. Most people increase their retirement savings as their income grows.

If you have a 457(b) plan like those offered by the New York State Deferred Compensation Plan, you can use their interactive retirement planner to project a hypothetical view of what your retirement may look like based on information you provide

Savings Withdrawal Calculators

Savings withdrawal calculators are designed to help determine how much savings remains after a series of withdrawals. These are especially helpful tools to use when trying to determine how long your retirement savings will last, based on a starting amount, how much you expect to withdraw, how often and some other factors.

How Much Do You Need?

Now that you’ve estimated your potential sources of retirement income, it’s important to understand your anticipated expenses in retirement. Our Income and Expenses Worksheet can help you create a post-retirement budget.

Think of retirement security as a three-legged stool, with your NYSLRS pension, social security benefit and retirement savings working together to provide financial stability. Your NYSLRS pension is a defined benefit, or traditional pension, that will provide you with a monthly payment for the rest of your life. Having a retirement savings account can give you more flexibility to do the things you want to do, or provide a source of cash in case of an emergency. Start saving for retirement if you haven’t already, or give your retirement savings a boost.

Are You Prepared for a Long Retirement?

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.

life expectancy statistics to help plan for a long retirement

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.

Your NYSLRS Pension Benefit

Your NYSLRS pension is a lifetime benefit that will provide monthly payments throughout your retirement. Get a head start on your retirement planning and estimate your pension in Retirement Online.

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.

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.

What is Your Net Worth?

When it comes to understanding your finances, a good place to start is by calculating your net worth.

Net worth is the total value of everything you own, minus the money you owe. It is a measure of your wealth and an indicator of your financial condition. It can also provide you with valuable insight as you start developing your financial plan for retirement.

How to Calculate Net Worth

The formula for calculating your net worth is simple:

net worth formula

Assets and Liabilities

Your assets are items of value that you own, including:

  • Your house
  • Other real estate (a vacation home, rental property)
  • Money in checking and saving accounts
  • Retirement savings, such as a 401(k) or Deferred Compensation account
  • Stocks, bonds and other investments
  • Your car and other vehicles
  • Jewelry, furniture and household items

Your liabilities are your debts. Your mortgage, credit card debts and loan balances factor into your total liabilities.

If you owe more than the value of your total assets, you have a negative net worth. A negative net worth may not necessarily mean you’re in financial trouble — it just means that at the moment you have more debts than assets.

If you’re just beginning your career and still have student loans, you may find yourself in negative territory. But your net worth is likely to increase over time as you pay down debts and save money.

Knowing Your Net Worth Can Help You Get a Handle on Your Finances

Your net worth shows your current financial status. When you know where you stand, you’ll be better prepared to make decisions about spending, saving and investing, which will help you achieve your short- and long-term financial goals. Your net worth can show you where you’re doing well and where there’s room for improvement. For example, it may indicate a need to curb your spending or reduce your credit card debt.

Your net worth is likely to change over time, so it’s a good idea to calculate it periodically. With this updated financial information, you’ll be able to track trends and make adjustments if necessary.

To learn more about net worth and what it means, you may wish to read What’s Your Net Worth Telling You?

ERS Tier 6 Benefits – A Closer Look

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.

Other Sources of Post-Retirement Income

Social Security: According to the Social Security Administration, Social Security currently replaces about 40 percent of the wages of a typical worker who retires at full retirement age. In the future, these percentages may change, but you should still factor it in to your post-retirement income.

Your Savings: Retirement savings can also replace a portion of your income. How much, of course, depends on how much you save. The key is to start saving early so your money has time to grow. New York State employees and some municipal employees can participate in the New York State Deferred Compensation Plan. If you haven’t already looked into Deferred Compensation, you might consider doing so now.