Tag Archives: savings

Are You Prepared for a Long Retirement?

5 Replies

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

16 Replies

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). You can start by saving as little as $10 per pay period. That 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.

Financial Literacy and Retirement

9 Replies

April is National Financial Capability Month, but it’s better known as Financial Literacy Month. It’s dedicated to helping people understand how to make informed financial decisions and manage money effectively.

A recent report from the TIAA Institute finds that “adults with greater financial literacy tend to have better financial well-being.” In addition:

  • Participants who had more financial knowledge were more likely to be saving for retirement.
  • Retirement readiness tends to be better among those with greater financial literacy.
  • For retirees, 88 percent of those who were the most familiar with financial literacy concepts said that their retirement has met or exceeded their expectations.
financial literacy

Financial literacy encompasses a variety of skills, but we’ll focus on some basics that are relevant to planning for a successful retirement. Whether you’re just starting your career or planning on retiring soon, mastering these skills will help you improve your future financial security.

Financial Literacy Begins With the Basics

A good way to start building your financial literacy is by understanding your current financial situation. Ask yourself some basic questions:

  • How much do you earn and spend each month? 
  • How much debt do you have?
  • Do you have any major expenses on the horizon?

If you know where you stand, you’ll be in a better position to plan.

You can estimate your pension by using the benefit calculator in Retirement Online to get an idea of what you’ll earn in retirement. (You can also check your future Social Security benefit online.)

Creating a Budget

Tracking your income and expenses can help you make better financial decisions, avoid debt, prepare for emergencies and save money.

If you don’t know how to get started, here are some tips on creating a budget. If you plan to retire soon, you can use our worksheet to create a post-retirement budget. 

Debt and Interest Rates

Debt is not necessarily bad, but it can easily derail your financial plans if you’re not careful. Credit cards pose a risk because they are easy to use and may have very high interest rates. The average interest rate is about 21 percent.

If you have credit card debt and only pay the minimum each month, you’ll make little progress on reducing the balance while the interest you accrue every month adds up. For example, if you owed $1,000 on a credit card with a 21 percent interest rate and made payments of $40 a month, it would take you 34 months to pay off, and your total interest cost would be more than $300. On the other hand, if you paid $100 a month, it would be paid off in 12 months and your total interest would be just over $100.

Saving

As a NYSLRS member, you’ll receive a lifetime pension that will be based on your years of service and earnings. Building a retirement savings to supplement your pension and Social Security can create more financial security. It’s never too early or too late to start saving for retirement. To learn more about building your savings, read our recent blog post, The Right Time to Start Saving for Retirement is Now.

Follow our blog for future posts on retirement savings and related topics.

What to Consider When Choosing Your Retirement Date

13 Replies

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 Plan. In 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.

Supplement Your NYSLRS Pension With Retirement Savings

8 Replies

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

Why Should You Save for Retirement?

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

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

Setting a Retirement Savings Goal

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

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

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

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

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

retirement savings

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

Here is one possible withdrawal strategy, which was designed to provide retirement income for 20 years. Please note, if your retirement is far in the future, the money you withdraw may not have the same value that it has today. However, while inflation has been high in recent months, it does cycle and has been much lower in the past.

COLA coming soon

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

How To Get Started

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

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

More Information About Retirement Savings

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

What is Your Net Worth?

Leave a reply

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

27 Replies

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

formula for a financially secure retirement

Calculating an ERS Tier 6 Member’s Pension

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

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

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

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

Examples of ERS Tier 6 Pension Calculation

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

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.

Give Your Retirement Savings a Boost

10 Replies

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

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

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

retirement savings

Impact on Your Paycheck

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

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

When to Increase Retirement Savings?

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

Crunching the Numbers: A Short Guide to Retirement Calculators

3 Replies

A good estimate of your post-retirement income is essential to retirement planning. But estimating your income becomes a little tricky when you need to calculate income from several sources. Fortunately, there are retirement calculators available to help you.

online calculators

NYSLRS Benefit Calculator

A good place to start is with the NYSLRS online benefit calculator. Most members can create a pension estimate in minutes using Retirement Online. A Retirement Online estimate is 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.

Social Security Calculators

The Social Security Administration (SSA) hosts a variety of calculators that you may find helpful. The SSA’s Quick Calculator, which uses information you enter, provides a rough estimate of your Social Security benefit. The Retirement Estimator, which estimates your benefit based on your actual Social Security earnings record, is more refined, but you’ll need to enter your Social Security number and other personal information.  

You can also calculate 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 show you how your money can grow over the years. But simple calculators assume a fixed amount of savings each month. In reality, most people increase their retirement savings as their income grows. With more sophisticated calculators, like this 401k Retirement Calculator, you can account for salary increases over time. (Note: The 401k Retirement Calculator works with other types of retirement savings plans, including 457(b) plans like the ones offered by the New York State Deferred Compensation Plan.)

Savings Withdrawal Calculators

Savings withdrawal calculators like this one 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. Enter the starting amount, how much to withdraw and how often, and an expected final balance will be calculated.

While the calculators mentioned above are great planning tools for before and after retirement, remember that their results are only estimates.

The Right Time to Start Saving for Retirement is Now

2 Replies

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

Why Save for Retirement?

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

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

Retirement savings can also be a hedge against inflation and a source of cash in an emergency. A healthy retirement account will give you more flexibility during retirement, helping ensure that you’ll be able to do the things you want to do. It can also provide peace of mind.

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.)