Tag Archives: retirement security

Are You Prepared for a Long Retirement?

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.

A Century of Security and Stability

A century after its creation, the New York State and Local Retirement System (NYSLRS) is widely recognized as one of the best-managed and best-funded public pension systems in the nation. Comptroller DiNapoli recently announced that the New York State Common Retirement Fund (Fund), which holds and invests the assets of NYSLRS, had an estimated value of $254.8 billion as of March 31, 2021 – a record high for the Fund. The security and stability of NYSLRS and the Fund are due, in large part, to the stewardship of Comptroller DiNapoli, as well as a long line of State Comptrollers that came before him. The System has also been bolstered by some key events along the way.

NYSLRS History - key events contributing to the security and stability of the Retirement System and the Fund

In the Beginning

NYSLRS’ security and stability were built in at the start. In 1918, the State Legislature created the Commission on Pensions and charged it with recommending a pension system for State workers.

After surveying pension plans in New York and other states, the Pension Commission recognized the need to calculate the cost of the pension plan through actuarial calculations, which take into account such things as employees’ salaries and how long they are expected to be retired. They also saw the need to make provisions to cover those costs through contributions and other income. They recommended a plan supported by the contributions of employers (New York State and, eventually, local governments) and employees. The improved actuarial calculations the System uses today helps to ensure that member contributions and employer annual contributions are sufficient to keep the System adequately funded.

The Pension Commission also recommended a service retirement benefit be made available to workers who reached a certain age, based on average earnings and years of service. Though they didn’t use the term, their pension plan was very similar to the defined-benefit plan NYSLRS members have now.

Unlike the 401k-style defined-contribution plans common in the private sector today, a defined-benefit plan provides a guaranteed, lifetime benefit. With a defined-benefit plan, you don’t have to worry about your money running out during retirement, and your employer has an excellent tool for recruiting and retaining workers.

Constitutional Protection

In 1938, New York voters approved several amendments to the State Constitution, including Article 5, Section 7, which guarantees that a public pension benefit cannot be “diminished or impaired.” This constitutional language protects the interests of the Fund and its members and beneficiaries, ensuring that the money the Fund holds will be there to pay the pensions for all current and future retirees. The courts have upheld this constitutional provision to protect the Fund several times over the years.

For NYSLRS members and retirees, that means the retirement benefits you were promised when you started your public service career cannot be reduced or taken away.

Sound Investments

Sound investments are crucial to the health of the Fund, but in some cases changes in the law were needed to give Fund managers the flexibility to make the best investments. In 1961, the Fund was allowed to invest in the stock market, opening up the door for growth opportunities. Roughly half of the Fund’s assets are currently invested in stocks.

In 2005, the Legislature expanded the types of investments the Fund could make, allowing the Fund to increase investments in real estate, international stocks and other sectors that had been providing high returns.

Today, under Comptroller DiNapoli’s leadership, the Fund’s investment returns cover the majority of the cost of retirement benefits. After suffering a drop in value at the beginning of the COVID pandemic, the Fund had its best year in history, with estimated investment returns of 33.55 percent for fiscal year 2021.

NYSLRS is well-positioned to face the challenges of the future and provide retirement security for more than 1.1 million members, retirees and beneficiaries.

The Common Retirement Fund: 100 Years of Strength and Security

In 1921, NYSLRS’ pension fund held several million dollars and provided benefits to just a few dozen State employees. Today, the Common Retirement Fund (Fund) provides more than a billion dollars per month to hundreds of thousands of retirees and beneficiaries.

The System’s founders showed foresight in establishing the framework for a sustainable retirement system capable of providing long-term pension security for its members and retirees. Today, one hundred years later, we are considered one of the strongest public pension funds in the country, thanks in large part to the stewardship of Comptroller DiNapoli, trustee of the Common Retirement Fund and administrator of NYSLRS for the past 14 years.

Comptroller DiNapoli’s diligent efforts to maintain the financial well-being of the Fund, the fact that NYSLRS’ participating employers contribute their share into the Fund, and New York’s constitutional requirement that lifetime pension benefits be guaranteed to all NYSLRS retirees — all these elements combine to ensure that NYSLRS retirees will enjoy secure benefits for generations to come.

Common Retirement Fund - A Snapshot of Growth

Investments

The Common Retirement Fund has been widely recognized as one the best-funded and best-managed public pension fund’s in the nation. (In June 2020, the Pew Charitable Trusts ranked NYSLRS as the second-best-funded public retirement system in the nation, based on 2018 data.) The cornerstone of the Fund’s reputation is its sound investment policies. At the direction of Comptroller DiNapoli, Fund managers use a long-term investment strategy designed to take advantage of growth opportunities during good economic times, while helping the Fund weather economic downturns.

The Comptroller seeks the input of a wide range of internal and external advisors, consultants and legal counsel who help to determine the best investment choices and allocation of assets for the Fund. These advisors provide independent advice and oversight of all investment decisions, serve as part of the chain of approval on all investment decisions before they reach the Comptroller for final approval and participate on advisory committees that meet periodically throughout the year.

Fund assets are invested in a diversified portfolio. About 55 percent of the assets are invested in publicly traded stocks. Other investments include bonds, mortgages, real estate and private equity.

The Fund is also strengthened by a forward-looking approach to addressing climate change-related investment risks and capitalizing on the opportunities created by the transition to a low-carbon economy. Comptroller DiNapoli recognizes that climate change poses an enormous threat to the global economy and to the Fund’s investment portfolio. Recently, he announced plans to transition the Fund’s portfolio to net zero greenhouse gas emissions by 2040. This process will include a review of investments in energy companies and, where consistent with his fiduciary responsibility to maintain the long-term financial health of the Fund for NYSLRS members, divestment of companies that don’t meet minimum standards. This policy will help ensure that the Fund adapts to a changing global economy and maintains its growth in coming decades.

The Common Retirement Fund’s Impact on New York Businesses

The Common Retirement Fund’s In-State Private Equity Program invests in new and expanding New York companies and makes capital available to qualifying small businesses. As of March 31, 2020, the Fund’s private equity portfolio included investments in over 330 New York businesses with a total value of $1.9 billion. These investments boost the State’s economy while at the same time generating significant returns for the Fund.

Looking Forward

As the Common Retirement Fund’s assets have grown over the years, so have its obligations. As of March 31, 2020, there were 487,407 NYSLRS retirees and beneficiaries, who were paid $13.4 billion in benefits over the previous year. That’s up from 67,689 retirees and beneficiaries, who were paid $194 million in benefits in 1971. Roughly a third of NYSLRS members are expected to retire over the coming decade.

Comptroller DiNapoli’s focus on continuing the Fund’s record of strong growth ensures that the Retirement System will be ready to meet the challenges of the future. The New York State Common Retirement Fund’s estimated overall investment return was 33.55 percent for the State fiscal year that ended March 31, 2021, reflecting the financial markets’ dramatic rebound from lows reached during the COVID-19 pandemic. The return on investments increased the Fund’s value to an estimated $254.8 billion. More than 1.1 million NYSLRS members, retirees and beneficiaries can continue to rely on the Retirement System for their retirement security.

Celebrating 100 Years of NYSLRS

NYSLRS 100

On January 3, 1921, NYSLRS began helping New York’s public employees achieve financial security in retirement. Now – 100 years later – we continue to fulfill that promise.

NYSLRS’ Origins

Governor Alfred Smith
In 1920, Governor Al Smith signed legislation establishing the New York State Employees’ Retirement System.

In 1920, the State Commission on Pensions presented Governor Al Smith a report they’d been working on for two years. The report showed that though there were already pension plans covering 8,300 banking department employees, teachers, State hospital workers, Supreme Court and other certain judiciary employees and prison employees, 10,175 State employees were not covered. To help ensure the financial security of public employees during their retirement years, the Commission recommended that a system be established to pay benefits to State employees – and the Commission wanted a system that would always have enough money on hand to pay benefits.

On May 11, 1920, Governor Smith signed legislation creating the New York State Employees’ Retirement System. By June 30 1921, 43 retirees were drawing pensions. The total amount of their annual pensions was $17,420.16. The first disability pension benefit of $256 per year was also paid.

Still Fulfilling Our Promise After 100 Years

Today, there are more than one million members, retirees and beneficiaries in our system, and NYSLRS is one of the strongest and best funded retirement systems in the country. Last fiscal year, NYSLRS paid out $13.25 billion in retirement and death benefits.

Members of the Employees' Retirement System, 1921
Members of the Employees’ Retirement System gather on the steps of the State Education Department building in Albany, NY in 1921.

Our core mission for the last 100 years has been to provide our retirees with a secure pension through prudent asset management. This has been our promise since 1921 and will continue far into the future.

Sources: Report of the New York State Commission on Pensions, March 30, 1920; Chapter 741 of the Laws of 1920; and Report of the Actuary on the First Valuation of the Assets and Liabilities of the New York State Retirement System as of June 30, 1921.

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 their 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.

choosing your retirement date

Your Health

Your current health, and your long-term health prospects, should be a factor in selecting your retirement date. If your health is poor, you may want to consider retiring 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 your health is good, 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 increase your savings.

Your Savings

NYSLRS has always encouraged its members to save for retirement as a supplement to their NYSLRS pension and Social Security. Retirement savings are a hedge against inflation, can help in an emergency and allow you to do the things you want to do during retirement.

Having retirement savings gives you more flexibility, and if you have enough saved, that 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 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. (The Deferred Compensation Plan is not affiliated with NYSLRS.)

In 2021, you can save up to $19,500 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 2021 is $6,500, for a total limit of $26,000.

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 if you’re working in an office, that’s generally not the case.

But there are other things to consider about your current job. Some members want to retire as soon as they’re eligible to go, but 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 to 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.

But 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. But whether you decide to retire earlier or later, having a plan for retirement can help make it a more satisfying experience.

Your NYSLRS Pension is Secure

You probably have a lot on your mind right now, but one thing you don’t need to worry about is your NYSLRS pension. Despite the turmoil in the financial markets, your retirement benefits are secure.

“I want to assure the more than one million men and women who rely on the State pension fund for retirement security that we are well-positioned to weather the ongoing volatility,” said New York State Comptroller Thomas P. DiNapoli. “To our retirees, your pensions are safe and we will continue to pay your benefits as promised.”

The New York State Common Retirement Fund, which holds and invests NYSLRS assets, has long been recognized as one of best managed and best funded public pension plans in the nation. The strength of the Fund puts NYSLRS in a good position as we navigate through the current economic turmoil.

The Fund’s professional managers take a conservative approach to investing and focus on sustained, long-term results. This approach allows the Fund to capitalize on investment opportunities in good times and cushions it against market ups and downs. In recent months, as they recognized increased volatility in the market, Fund managers began making adjustments to the Fund’s investment portfolio to prepare for an expected downturn in the economy. They are actively managing the Fund through these difficult times and are confident the markets will ultimately recover.

What is a Defined Benefit Plan?

As a NYSLRS member, you are part of a defined benefit plan, also known as a traditional pension plan.

Your pension is based on a preset formula that takes into account your salary and years of service. It will not be based on your individual contributions to the Retirement System.

If you retire with a NYSLRS pension, you will receive a monthly pension payment for the rest of your life.

Defined Contribution Plans

Defined benefit plans are often confused with 401(k)-style retirement savings plans, which are defined contribution plans.

With a defined contribution plan, the employer, employee or both make contributions to an individual retirement account, and the money in the account is invested. In most cases, it is the responsibility of the employee to make investment decisions, or the plan may offer pre-packaged investment options. At retirement, the employee will have an account that includes the accumulated value of contributions and investment returns, minus any fees.

The amount of money the employee has at retirement is dependent on the investment returns of the individual account, so market downturns, especially near retirement, can affect the value of the benefit. The employee also can run the risk of outliving their savings.

defined benefit plan

NYSLRS’s Defined Benefit Plans

NYSLRS actually administers more than 300 retirement plans, but all are defined benefit plans and share certain features. NYSLRS plans:

  • Provide a guaranteed lifetime retirement benefit;
  • Offer a pension that is based on final average salary and years of service;
  • Provide a right to pension benefits (vesting) with five years of service credit (ten for Tier 5 and 6 members);
  • Build a cost-of-living adjustment (COLA) into pensions to help offset the effect of inflation; and
  • Include disability and death benefits.

To find out details about your own NYSLRS plan, check your retirement plan booklet. You can find a copy on the Publications page of our website.

Common Retirement Fund Earns Strong Investment Returns

The New York State Common Retirement Fund (Fund) holds retirement investments in trust for more than 1 million New York State and Local Retirement System (NYSLRS) members. In the State fiscal year ending March 31, 2018, it generated strong investment returns of 11.35 percent. The Fund ended the year with an audited value of $207.4 billion.

New York State Common Retirement Fund Value

Strong Investment Returns

Independent studies regularly confirm the financial soundness of NYSLRS. Just this year, a study by the Pew Charitable Trusts ranked NYSLRS among the best-funded state retirement systems. In fact, a new State fiscal year 2018 report from our actuary ranks NYSLRS at 98 percent funded, which puts us well above the national average of 66 percent funded.

Comptroller Thomas P. DiNapoli, trustee of the Fund, credits the growth to a long term, diversified investment strategy and solid market growth through most of the fiscal year, despite a volatile fourth quarter

Investing for Retirement Security

The Fund is the country’s third-largest public pension fund. NYSLRS provides retirement security to more than 1 million active state and local government employees, retirees and their beneficiaries. During the fiscal year that ended March 31, 2018, NYSLRS paid out $11.45 billion in retirement and death benefits. More than $9.8 billion of that went to residents of New York State, which generated local spending and provided economic support to New York businesses and communities.

Investing Responsibly

While successfully providing financial security for New York’s government workers and retirees, Comptroller DiNapoli’s has also put investment dollars to work helping New York businesses grow and addressing the long-term threat of climate change.

The In-State Private Equity Program invests in New York-based business ventures, companies and other programs that spur economic growth and create and retain jobs. Recently, Comptroller DiNapoli raised the program’s total commitments to $1.6 billion. Since 2000, it has returned $863 million on $583 million invested in 139 transactions.

And recently, the Asset Owners Disclosure Project once again named the Fund as the number one U.S. pension fund — and the third globally — for its work to address climate risk. The Fund’s portfolio includes $7 billion dedicated to sustainable investments, including $4 billion in a low emissions index that shifts stock holdings away from the biggest carbon emitters.

Infographic regarding spending habits

Spending Changes in Retirement

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

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

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

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

Infographic regarding spending habits

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

Prepare a Post-Retirement Budget

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

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

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

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

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

Monthly budgeting worksheets (PDF)

Monthly Worksheets (PDF)

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

Health Care Costs Can Be Steep in Retirement

As you plan for your retirement, you may be forgetting one important thing – health care.

NYSLRS does not provide health care coverage for its retirees, and we’re not the experts on this subject. But we do offer advice to members about retirement planning, and how you’ll pay for health care coverage and out-of-pocket medical expenses should be an important consideration as you approach retirement.

Know the Health Care Cost Facts

Medicare premiums, deductibles, co-payments and prescription drug costs all add up. And those expenditures are likely to rise because health costs have been increasing faster than the rate of inflation and people spend more on medical expenses as they age.

Recent reports indicate a typical 65-year-old retiring in 2018 would spend well over $100,000 to cover medical costs over the course of retirement. What’s more, most NYSLRS members can retire as early as 55. That means you may spend a longer time in retirement than the average retiree, and you may not be eligible for Medicare for years.

couple working on their budget together

What You Can Do To Prepare

Before you can budget for retirement medical costs, you’ll need to do your homework. Start by talking to your employer about the health care options available to you after your retire and get an estimate of how much you will need to pay. You should also familiarize yourself with Medicare’s options, benefits and costs.

Once you get an idea of what your monthly health care might be, you can start planning how to pay for it. You may have to increase your retirement savings. If you’re a state employee, or a municipal employee covered by the New York State Health Insurance Program (NYSHIP), you may be able to get credit for unused sick leave that can reduce your NYSHIP premium. This program is managed by the New York State Department of Civil Service, not NYSLRS. Their Planning for Retirement booklet provides some good information.