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NYSLRS Retirees Build a Stronger New York

NYSLRS pension benefit can provide security and peace of mind in retirement. What some retirees might not realize about their lifetime benefit is the effect it has on the local economy. During 2014 alone, NYSLRS retirees were responsible for $12 billion in economic activity in New York State. By buying local goods and services, NYSLRS retirees help existing companies grow, create opportunities for new businesses, and help foster an environment that helps companies create job opportunities.

NYSLRS Retirees in New York

Of the 430,308 current NYSLRS retirees and beneficiaries, 78 percent of them live in New York State. These retirees make up 2.8 percent of the general population, but their impact on the State economy is considerable:

  • Retiree Spending Creates Jobs, Supports Local Business. NYSLRS retirees spend a larger than average share of their income on industries that benefitted local businesses, such as health care, restaurants and entertainment. These industries can expect more growth in the coming decades with NYSLRS retirees as part of their customer base. As a result of this spending, NYSLRS retirees were also responsible for an estimated 60,400 jobs.
  • Retirees Pay Billions in Taxes. In 2014, NYSLRS retirees paid $1.6 billion in real property taxes, which is five percent of the total collected in New York. These taxes help support New York schools, roads and government services. Also, spending by NYSLRS retirees and beneficiaries generated an estimated $514 million in state and local sales tax.

After spending their careers working in State and local governments, the university system, public authorities and schools, NYSLRS retirees continue to help New York’s Main Streets grow and develop. The benefits of a NYSLRS pension aren’t just felt by retirees, but also by local businesses and communities. As the number of NYSLRS retirees continues to grow, the investment they make in communities across New York State will also continue to grow.

Income Inequality and Pension Reform

Is the shift away from defined benefit pension plans hurting more than helping?

Today’s pension reform means increasing employee contributions, cutting pension benefits, and switching from defined benefit (DB) plans to defined contribution (DC) plans. In fact, according to a new study from the National Conference on Public Employee Retirement Systems (NCPERS), 15 million additional workers would have defined benefit plans if there had not been a trend over the past 30 years to convert pensions into defined contribution (DC) plans. However, there may be a hidden cost to this approach. As these reforms negatively affect plan participants and beneficiaries, income inequality appears to increase.

In the study, NCPERS looks at the growing debate between DB and DC plans. Those in favor of DC plans claim that DB public pension plans aren’t sustainable and taxpayers can’t afford to pay them. Others defend DB pensions, arguing the pension benefits are a type of deferred compensation and not the responsibility of taxpayers. Regardless of what side of the debate you’re on, here’s the hard reality:

  • In a DB plan, the employee receives a lifetime benefit based on years of service and salary.
  • In a DC plan, there’s no guarantee the employee will have enough or any retirement income upon retirement.

Income Inequality Worsening for Seniors

Despite the positive aspects of DB pensions, the trend against them continues, and the effects could be damaging. Several studies mentioned by NCPERS point out the reduction of retirement benefits and the shift away from DB pensions increase income inequality—even poverty—in the elderly. One study from the National Institute on Retirement Security (NIRS) found that poverty rates in senior citizen households without pensions were almost nine times higher than those with pensions.Income Inequality: The Elderly Poverty Rate is 9 times greater with no defined benefit income

The Economic Impact of NYSLRS Retirees

These are startling findings, considering the important role of pensions and retiree spending in the economy. In the US, retirees spend almost $838 billion each year, which employs millions of Americans and tens of millions indirectly. For every dollar paid in pension benefits, there’s $2.37 in economic output. In New York, retirees play an important role in the state economy. New York State and Local Retirement System (NYSLRS) retirees generate $11.3 billion in economic activity by spending $9.6 billion in the state. The pension benefits earned by NYSLRS retirees flows directly back into the local communities and economies.

As more negative changes affect DB pension plans and retiree benefits, the decrease in retiree spending will be felt throughout the economy.

“Personal income loss has a ripple effect, and everyone suffers when income inequality rises and economic growth weakens,” said NCPERS President Mel Aaronson. “Spending by retirees is vital to communities, yet local spending can easily be undermined by shortsighted changes to defined benefit pension plans.”

New York State Comptroller Thomas P. DiNapoli, Administrator of NYSLRS and sole trustee of the Common Retirement Fund, has often said that DC plans would put more people at risk in their retirement years. During an editorial board meeting of The Syracuse Post Standard last October 20, he also maintained that switching to a defined contribution plan won’t change the state’s obligation to provide a pension to the 1 million people already in the system. “A 401(k) was never meant to be the substitute for a pension,” DiNapoli said.

Study Finds Retiree Spending a Big Supporter Of The Economy

retirees-in-NYS_top-10-countiesA recent National Institute on Retirement Security (NIRS) study reveals that pension benefit payments provide important support to the economy, generating more than $943 billion in total economic activity and 6.2 million jobs in the United States.

The NIRS study reports on the national economic impacts of public and private pension plans, as well as the impact of state and local plans on a state-by-state basis. It measures the ripple effect of the pension benefit income spent by retirees in 2012 – about $228.5 billion paid to 9 million retired employees of state and local government and their beneficiaries. Retiree spending helped to support labor income, paying nearly $307 billion, and also generated $135 billion in tax revenue at the local, state and federal levels.

New York Retirees Contribute Their Fair Share

At the time of the NIRS study, NYSLRS retirees* were responsible for more than $11 billion worth of economic activity in New York State. The pension benefits they received stimulated our local economies in a number of ways:

  • NYSLRS Retirees Stayed in New York: Seventy-eight percent of NYSLRS’ 413,436 pensioners – 302,954 retirees and beneficiaries – chose to live in New York in 2012. They made up 2.7 percent of the general population, but in some areas of the State, they accounted for nearly five percent of the residents.
  • NYSLRS Retirees Paid New York Taxes: In 2012-2013, NYSLRS retirees paid $1.4 billion in real property taxes – that’s 4.6 percent of the total collected in the entire State. Additionally, NYSLRS retirees paid an estimated $488 million in state and local sales tax in 2012.
  • NYSLRS Retirees Created Jobs: NYSLRS retirees were responsible for the creation of an estimated 61,000 jobs.

Public Pensions Are A Sound Investment In Our Future

The pensions earned by public service retirees don’t just benefit those who receive them, but they pay dividends to local businesses, build strong communities and create jobs. And, as the number of retired public service employees in New York grows, we can look forward to their help in building a stronger New York.

*Read Retirees Contribute (PDF) to see the latest numbers on how NYSLRS retirees have affected the state economy.

NYSLRS Retirees Contribute to the New York Economy

NYSLRS Retirees Build a Strong New York

As baby-boomers hit retirement age, a growing segment of our population is giving back to our state: public service retirees. NYSLRS Retirees are our neighbors, our friends and members of our family, and the pension money paid to retired state and local employees flows directly back into our communities, stimulating and growing our local economies.

Store owner by door with open sign

Approximately 80 percent of the cost of pension benefits comes from investment earnings of the Common Retirement Fund rather than the contributions of taxpayers.

During 2012, retirees of the New York State and Local Retirement System (NYSLRS) were responsible for $11.1 billion in economic activity in New York State. The goods and services NYSLRS retirees use create opportunities for new businesses in New York, help grow existing companies and create jobs. Public service retirees are particularly important to merchants because their retirement income provides a stable foundation of customers for local businesses.

After a career working for the people of New York, public service retirees continue to contribute — not just as engaged citizens, but as individuals who bring value to the communities where they live.

NYSLRS Retirees Live in New York State

In 2012, 302,954 NYSLRS retirees and beneficiaries lived in New York State (outside NYC)  As of March 2013, there were 413,436 NYSLRS retirees — 78 percent of whom have chosen to live here in New York. They are former employees of New York State, the university system, public authorities, local governments, and schools, and many of them give back to their community as volunteers and supporters of charitable causes.  NYSLRS retirees are widely distributed across different regions of New York. They make up 2.7 percent of the general population, but in some areas of the state, they account for nearly 5 percent of the residents.

In 2012, 302,954 NYSLRS retirees and beneficiaries lived in New York State (outside NYC).

As of March 2013, there were 413,436 NYSLRS retirees — 78 percent of whom have chosen to live here in New York. They are former employees of New York State, the university system, public authorities, local governments and schools, and many of them give back to their community as volunteers and supporters of charitable causes.

NYSLRS retirees are widely distributed across different regions of New York. They make up 2.7 percent of the general population, but in some areas of the state, they account for nearly 5 percent of the residents.

NYSLRS Retirees Pay Taxes in New York

Retirees and their beneficiaries paid $1.4 billion in real property taxes — nearly twice their share of the NYS population (excluding New York City) 2012 – 2013 Fiscal Year

Retirees and their beneficiaries paid $1.4 billion in real property taxes — nearly twice their share of the NYS population (excluding New York City) 2012 – 2013 Fiscal Year.

Schools, roads and government services of every sort — they all have something in common: public service retirees help make them possible.

In 2012-2013, NYSLRS retirees paid $1.4 billion in real property taxes — that’s 4.6 percent of the total collected in New York. In some areas of the state, this figure is even higher. In the North Country, NYSLRS retirees pay nearly 8 percent; in the Capital District, nearly 7 percent of the property taxes collected.

Additionally, NYSLRS retirees paid an estimated $488 million in state and local sales tax in 2012.

NYSLRS Retirees Create Jobs

Man Standing by Fruit Kiosk

Spending by NYSLRS retirees and their beneficiaries generated an estimated $246 million in state sales tax in 2012.

Business sectors that cater to the needs of retired consumers are booming. In the coming decades, industries such as health care, restaurants and entertainment are predicted to be areas primed for growth — and retired public employees will be an important part of its customer base.

NYSLRS retirees spend a larger than average share of their income on industries that benefit local businesses and they are responsible for an estimated 61,000 jobs as a result of this spending.

The Foundation of a Strong New York

NYSLRS Retirees and their beneficiaries spent $8.9 billion within New York State in 2012

NYSLRS Retirees and their beneficiaries spent $8.9 billion within New York State in 2012.

The pensions earned by public service retirees are a sound investment in New York’s future. These funds don’t just benefit those who receive them, but pay dividends to local businesses, build strong communities and create jobs. As the number of retired public service employees in our state grows, we can look forward to their help in building a stronger New York.

 

Source: NYSLRS Comprehensive Annual Financial Report; US Census Bureau; OSC Analysis; OSC Annual Report on Local Governments (Rev. 1/14)