October is National Retirement Security Month. It’s a time to consider the importance of saving and to think about potential sources of income in retirement. Financial security doesn’t just happen—it takes preparation and time. Even if retirement seems far off, it’s never too early to start planning.
NYSLRS and Retirement Security
Check out these blog posts to learn more about how your NYSLRS pension and other sources of retirement income can provide retirement security.
As a NYSLRS member, you are enrolled in a defined benefit plan, also known as a traditional pension plan. When you retire, you will receive a monthly pension payment for the rest of your life. Your pension will be calculated using a preset formula based on your earnings and years of service—it will not be based on the individual contributions you paid into the system.
Your NYSLRS pension is a good reason to be optimistic about your finances in retirement. But there is more to a financially secure retirement than having a pension. Think of retirement security as a three-legged stool. Each leg is a source of income to help support you when your working days are done.
If you want to improve your chances of a financially secure retirement, your plan should include retirement savings. It’s important to start saving early so your money has time to grow. When you invest your savings in an individual retirement account (IRA) or a 401(k)-style retirement savings plan, you earn a return on your investment, and those returns are compounded.
For greater financial stability and flexibility, you may want to invest in a deferred compensation savings plan. The New York State Deferred compensation plans are voluntary retirement savings plans like a 401(k), created for New York State employees and employees of other participating public employers.
As you get close to retirement, it’s a good idea to take inventory of any debt you owe. Paying down your debt—including any NYSLRS loans—will help avoid a pension reduction and can give you more flexibility in retirement.
Financial security doesn’t just happen; it takes planning and time. You know you can count on your NYSLRS pension in retirement. But, if you want to improve your chances of a financially secure retirement, your plan should include retirement savings. It’s important to start saving early so your money has time to grow.
When you invest your savings in an individual retirement account (IRA) or a 401(k)-style retirement savings plan, you earn a return on your investment, and those returns are compounded. That means your money increases in value by earning returns on both the original amount and your accumulated profits. This is different than earning simple interest. Let’s see how they both work.
How Simple Interest Works
In banking, simple interest is a certain percentage you are paid on the money you put into your account. With simple interest, the amount of interest you earn is based on the original (or principal) amount of the deposit.
Let’s say you open a certificate of deposit (CD), which pays 5 percent simple interest if you agree to keep your money in the CD for a year. If you deposit $1,000 in January, you’ll have $1,050 at the end of the year. That’s $50 more than you started with, so you might decide to keep your money there for another year. With simple interest, the interest you earn the second year and every year after would still be based on the principal amount of $1,000—no compounding.
How Compounding Works
With compounding, your initial investment is reinvested along with your earnings. If you earn the same 5 percent, with compounding, it’s applied to the full balance of your account. So, you would still have that $1,050 at the end of the first year, but by the end of the second year you’d have $1,102.50 in your account instead of $1,100.
In this example, that’s just a difference of $2.50, but, over time, compounding can mean a difference of hundreds or thousands of dollars.
If you’re already building retirement savings, think about giving your savings a boost. If you haven’t started saving yet, right now is the best time to start. The New York State Deferred Compensation Plan (NYSDCP) is available to New York State employees and some municipal employees. Once you’ve signed up, your retirement savings—which may be tax-deferred depending on the plan you choose—will be automatically deducted from your paycheck. Remember, the sooner you start saving, the more time your money has to grow.
Your NYSLRS pension 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.
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. It’s important to understand all your potential sources of income to effectively plan for the future and boost your retirement confidence.
Leg 1: Your NYSLRS Pension
NYSLRS pensions are defined benefit plans, also known as traditional pension plans. When you retire, you will receive a monthly pension payment for the rest of your life. Your pension will be calculated using a preset formula based on your earnings and years of service—it will not be based on the individual contributions you paid into the system. 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 for comprehensive information about your retirement benefits and how your pension will be calculated.)
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 personal savings is the 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.
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 applying various skills of personal finance management, including budgeting, planning, saving and investing.
Financial literacy is essential for effective retirement planning. When you understand your NYSLRS benefits, your other sources of retirement income and your current financial situation, you’ll be in a better position to plan for retirement.
Key Components for Financial Literacy
Assessing Finances and Budgeting
Whatever your goals, wherever you are in life, a clear-eyed assessment of your finances and effective budgeting are necessary. The 50/30/20 budget rule is one framework that can help you with both. It’s a popular way to start and stick to a budget that can work whether you’re just out of school looking at your first paycheck or retired and trying to make your savings last.
Divide Your Expenses
The idea is to divide your expenses into three categories: needs, wants and savings.
Needs are things you have to pay and can’t avoid—for example, housing costs, food, healthcare, childcare and utilities.
Wants are optional expenses. They may be fun or convenient, but they aren’t essential—for example, dining out, shopping, entertainment and vacations.
Savings& Managing Debt can help you grow your retirement assets (see more under Retirement Planning and Saving and Investing below) or build an emergency fund. This category also includes paying down debt—such as student loans or credit card balances—beyond minimum payments.
Budget Your Spending
Then, you allocate your after-tax income, with 50 percent going to needs, 30 percent to wants and 20 percent to savings. As you budget, make sure you include expenses that occur periodically, such as car and life insurance, and property and school taxes.
Managing debt is an important aspect of financial literacy. Throughout your life, you’ll need to maintain good credit, borrow responsibly and repay your debt diligently.
Credit Scores
Your credit score is a three-digit number used by lenders to judge how likely you are to pay back money you’re loaned. It’s based on your past payment history and other interactions with lenders. These three digits affect you more than you might realize.
According to the Consumer Financial Protection Bureau (CFPB), “Companies use credit scores to make decisions on whether to offer you a mortgage, credit card, auto loan, and other credit products, as well as for tenant screening and insurance. They are also used to determine the interest rate and credit limit you receive.”
Even if you’re doing everything right, misinformation in the files of credit rating companies can hurt your credit. So, check your credits scores regularly. You can do it online at AnnualCreditReport, the free-credit-report site authorized by the federal government and maintained by the three major credit reporting agencies.
Responsible Borrowing
The best way to maintain your credit score is to borrow responsibly and manage debt effectively. That means:
Pay your bills on time; pay more than the minimum payments if you can.
Avoid using all or most of your available credit.
Keep longstanding credit lines open (like a credit card you’ve had for many years).
Avoid accumulating excessive debt—especially opening several lines of credit in a short amount of time.
If you have more than one credit card balance, many financial advisors recommend paying as much as you can on the card with the highest interest rate, while still making at least the minimum payments on your lower-interest cards.
Debt is not necessarily bad, but if you’re planning to retire soon, paying it down can give you more flexibility to enjoy the type of retirement you want.
Retirement Planning
Retirement is a big step. In many ways, confidence in a comfortable retirement is the reason saving and building financial literacy throughout our lives is so important.
Understand Your Sources of Income in Retirement
As a NYSLRS member, you are enrolled in something increasingly rare these days: a defined benefit plan. If you are vested and retire from NYSLRS, you will receive a monthly pension payment for the rest of your life based on your years of service and earnings.
However, your pension is just one of three main sources of income in retirement. Think of retirement security as a three-legged stool. Each leg is a source of income, and you need all three for a stable retirement.
Your NYSLRS pension is a guaranteed lifetime benefit. Find your retirement plan publication for comprehensive information about your pension and the other benefits you are entitled to receive. Most NYSLRS members can estimate their pension benefit 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 and beneficiaries to see how those choices would affect your benefit.
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 a significant portion of your pre-retirement income, depending on how much you earned while working. You can estimate your benefit on the Social Security Administration website.
In addition to your NYSLRS and Social Security benefits, retirement savings can be an important financial asset when you retire. Savings can give you flexibility to travel, continue your education, pursue a hobby or start a business. It can be a resource in case of an emergency, act as a hedge against inflation and boost your retirement confidence.
Determine How Much You’ll Need in Retirement
Many financial experts cite a common rule of thumb when discussing income in retirement. They say you need 70 to 80 percent of your pre-retirement income to maintain your standard of living once you retire. This is meant to account for the range of expenses you’ll no longer have in retirement, such as payroll taxes, commuting costs or saving for retirement.
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.
If you’re already building your retirement savings, think about giving your savings a boost. Even a small increase could make a big difference over time.
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.
Many financial experts cite a common rule of thumb when discussing income in retirement. They say you need 70 to 80 percent of your pre-retirement income to maintain your standard of living once you retire. This is meant to account for the range of expenses you’ll no longer have in retirement, such as payroll taxes, commuting costs or saving for retirement. As a NYSLRS member, your plan for income in retirement likely includes your NYSLRS pension and Social Security benefits. However, for greater financial stability and flexibility, you may want to supplement with retirement savings. For example, you might start investing in a savings plan like the New York State Deferred Compensation Plan (NYSDCP).
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. NYSDCP is the 457(b) plan created for New York State employees and employees of other participating public employers in New York.
Just like with other retirement savings plans, you have options for how you make your NYSDCP contributions. You might choose a tax-deferred account where you make contributions with pre-tax money. With this option, you won’t pay State or federal taxes on the earnings you contribute until you start making withdrawals. Your employer may also offer the option for a Roth account where you make contributions with after-tax money. With this option, you do pay taxes now, but you won’t pay taxes on the withdrawals you make in retirement. Learn more about how traditional retirement savings and Roth accounts compare.
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.
As a NYSLRS member, you are enrolled in something increasingly rare these days: a defined benefit plan. If you are vested and retire from NYSLRS, you will receive monthly pension payments for the rest of your life based on your years of service and earnings. Your NYSLRS pension can provide a significant part of your retirement income, but it’s a good idea to supplement your pension and Social Security with a retirement savings account.
Additional retirement savings can give you flexibility to travel, continue your education, pursue a hobby or start a business. It can be a resource in case of an emergency or act as a hedge against inflation.
Your Retirement Savings Goal
How much you save is a personal decision. You can estimate your pension in Retirement Online to get an idea of the income it will provide in retirement. Use a retirement savings calculator to see how much a retirement savings plan could yield over time. Test the results with different savings amounts.
Below you can see the potential savings of someone who invests 50 dollars every two weeks for 30 years. While the stock market can be turbulent in the short term, in the long term, it returns on average about 10 percent a year as measured by the S&P 500 index.
As you get closer to retirement, you should develop a plan to withdraw money from your savings. That will give you a better idea of the income you might expect from your nest egg and a sense of how long it will last.
Here is one possible withdrawal strategy, which provides 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 would have today.
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.
Note: Generally, whatever your withdrawal strategy, federal law will eventually require you withdraw a certain amount each year from any tax-deferred retirement plan account. These are called required minimum distributions.
New York State Deferred Compensation Plan
One way State employees and many municipal employees can save for retirement is through the New York State Deferred Compensation Plan (NYSDCP). Once you’ve signed up, your retirement savings—which may be tax-deferred depending on the plan you choose—will be automatically deducted from your paycheck.
Check with your employer’s human resources or personnel office to see whether they participate in NYSDCP or if they offer other savings options. (NYSDCP is not affiliated with NYSLRS.)
Read More About Retirement Savings
When it comes to saving for retirement, there’s a lot to consider. You can find more information in these posts:
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.
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.
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.
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.
As you plan for retirement, you need to think about your sources of income in retirement. However, you should also consider how long your retirement income will need to last.
Longer Life Span, Longer Retirement
These days, a 55-year-old man can expect to live for another 27.4 years, to about 82. A 55-year-old woman can expect to live for more than 30 years. These figures, derived from the Social Security life expectancy calculator, are only averages. They don’t account for factors such as health, lifestyle or family medical history.
Here are some other statistics worth considering as you plan for retirement (as of the State fiscal year that ended March 31, 2022):
More than 37,000 NYSLRS retirees were over 85 years old;
More than 3,500 had passed the 95-year mark; and
401 NYSLRS’ retirees were 101 or older.
Considering that many public employees can retire as early as 55, it’s possible that a fair number of them could have retirements that last 45 years or more.
Saving for a Long Retirement
Your NYSLRS pension is one source of income that you can depend on however long your retirement lasts. Employees’ Retirement System (ERS) members who retired in fiscal year 2022 are receiving an average monthly pension of $2,748. Social Security is another long-term source. The average Social Security benefit for a retired worker was $1,837 a month, as of June 2023.
Your retirement savings is a crucial asset that can supplement your pension and Social Security. In a long retirement, savings can help with rising costs and provide a source of cash in an emergency.
It is never too late to start saving for retirement. The New York State Deferred Compensation Plan is one easy way to get started. It’s a program created for New York State employees and employees of participating public agencies. If you’re a municipal employee, ask your employer if you’re eligible for the Deferred Compensation Plan or another retirement savings plan. (The New York State Deferred Compensation Plan is not affiliated with NYSLRS.)
You should also visit our Start Saving for Retirement page. You’ll find an example of how much you can save over a 30-year period, and a sample withdrawal strategy designed to provide retirement income for 20 years.
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.
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.
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:
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.
NYSLRS pensions are 
