NIRS researchers discovered that some 62 percent of working households age 55–64 have retirement savings less than one times their annual income, which is far below what Americans need to be self-sufficient in retirement. NIRS reported that the typical near-retirement working household only has about $14,500 in retirement savings.
Even after counting households’ entire net worth, the report revealed that two-thirds (66 percent) of working families still fell short of conservative retirement savings targets for their age and income, based on working until age 67.
Retirement Crisis Feared By Many
Another NIRS report found that an overwhelming majority of Americans – 86 percent – believe that the nation faces a retirement crisis. Nearly 75 percent of Americans are concerned about their ability to achieve a secure retirement. Some 82 percent say a pension is worth having because it provides steady income that won’t run out, while 67 percent indicate that they would be willing to take less in salary increases in exchange for guaranteed income in retirement.
Comptroller DiNapoli’s Position On Retirement Security
New York State Comptroller Thomas P. DiNapoli, the administrator of NYSLRS and trustee of the Common Retirement Fund, has long addressed the topic of retirement security and called it “an issue that we have to confront.” In remarks he delivered last June during a Retirement Summit at The New School’s Schwartz Center for Economic Policy, the Comptroller called attention to the “staggering” national retirement savings shortfall that’s between $7 trillion and $14 trillion.
Comptroller DiNapoli is encouraging “not just a discussion of the race to the bottom, but a broader discussion about retirement security.”
This is the time of year when people set goals for themselves. At the New York State & Local Retirement System (NYSLRS), we believe in setting realistic financial goals, especially when it comes to preparing for retirement. Here are five goals we think you can achieve in 2015:
Choose a sensible savings plan that works for you. There are several ways to save for retirement, including starting a deferred compensation plan like the New York State Deferred Compensation Plan. The most important part of developing a savings plan is to start early. The sooner you start saving, the more time your money has to grow. And if you’re nearing retirement age, “binge saving” is always an option worth considering. Check out our Weekly Investment Plan to see how making a weekly investment can grow by age 65.
Track your current and future monthly expenses and income. We feature worksheets to help you prepare a post-retirement budget on our website. Keep track of what you spend now for a month or two to get an idea of how you spend your money. You should include periodic expenses, such as car insurance payments, or property and school taxes as well. Use another of our worksheets to help you summarize your current monthly income and estimate your post-retirement monthly income. Having a post-retirement budget can help you decide how to spend money in retirement, and if you’ll need to supplement your pension.
Request a NYSLRS retirement estimate. A NYSLRS retirement estimate provides you with an estimation of what your pension could be based on the information we have on file for you. You should request an estimate 18 months before your anticipated date of retirement. Many members don’t request an estimate because they don’t know their exact retirement date, but don’t let that stop you. It’s a good way to determine how retirement ready you are. At the very least, you should use our online Benefit Calculator to estimate your pension based on information you enter. Have your Member Annual Statement handy to help fill in key information.
Pay off your NYSLRS loans, if you have any. An outstanding loan balance at retirement will permanently reduce your NYSLRS retirement benefit. You cannot make loan payments after you retire, and the reduction does not go away after we recover the funds. Visit our website for information about making additional payments or increasing your loan payment amount.
Consult a financial planner or accountant. Financial planners don’t manage your money, but will assess your present financial condition and develop a practical plan to meet your specific goal and needs.
If you ever have any retirement-related questions, please contact us. And Happy New Year!
Many financial experts believe that you will need at least 70 to 80 percent of your pre-retirement income to enjoy the same standard of living once you retire. A sound financial plan can include your NYSLRS pension, Social Security benefits, and personal savings, but you still may need to supplement your retirement income the longer you are retired. A deferred compensation plan can be another source of retirement income to consider when saving for retirement.
What is Deferred Compensation?
Deferred compensation is a type of plan where part of your earned income is paid back to you at a later date. The money you set aside is tax-deferred, which means you do not pay federal or State tax on it until you begin to collect it.
The New York State Deferred Compensation Plan
The New York State Deferred Compensation Plan (NYSDCP) is a voluntary retirement savings plan created for New York State employees, and employees of other participating public employers. Participants in the NYSDCP have their contributions deducted automatically from each paycheck to their deferred compensation account. They can also choose from different investment options within the plan for their account.
If you work for a local government employer, please check with your human resources office or benefit administrator to learn about deferred compensation plans.
What Does Deferred Compensation Mean For Me?
Deferring income from your paychecks may mean you have less money to spend in the short-term but, in the big picture, you’re planning ahead for your financial future. You can enroll in a deferred compensation plan even if you’re approaching retirement or if you just started working. Usually, the sooner you start saving means you’ll be better prepared for your retirement.
Of course, there are other ways to save for retirement. A good financial planner, accountant or attorney can help you develop a practical plan that best meets your needs and goals.