Tag Archives: retirement plan

After You Retire

We’ve written a lot about preparing for retirement — how you should purchase any credit for past service, get a pension estimate, prepare a retirement budget, and more. But, what about after you retire? “So long, NYSLRS! Just keep the monthly payments coming.” Is that it?

Not exactly.

Sign Up for Retirement Online

We recently launched the new Retirement Online, a secure site that allows you to check important NYSLRS information, like the deductions from your latest payment and a summary of your benefits. You can also view or update beneficiaries and generate income verification letters right from your computer.

To access Retirement Online, visit the NYSLRS home page, then click “Register” or “Sign In.”

If You Move, Let Us Know

The United States Postal Service usually won’t forward pension checks to another address. (You may want to sign up for our direct deposit program.) But, pension payments aside, there are other things you’ll want from us once you retire. If we have your correct address on file, you’ll be sure to receive:

  • Your 1099-R form. Your pension isn’t taxed by New York State, but it is subject to federal income tax.
  • Your Retiree Annual Statement. It’s a helpful reference that spells out the benefits, credits and deductions you receive each year.
  • Any official notifications.
  • Your Retiree Notes

The fastest way to update your address is through Retirement Online. You can also mail a signed letter (with your name, old address, new address, date of change and retirement registration number) to:

NYSLRS
Attn: Pension Services
110 State Street
Albany, NY 12244-0001

Keep Your Beneficiaries Current

Reviewing your beneficiary designations periodically is important. By keeping them up to date, you ensure that any post-retirement death benefit will be distributed to your loved ones according to your wishes. You can use Retirement Online to change your death benefit beneficiaries at any time. Or, contact our Call Center, and we will send you the necessary form. If you aren’t retired yet, submit a Designation of Beneficiary form (RS5127).

Keep Your Loved Ones Informed

Your family or friends have to know to notify us when you die, so we can pay out any benefits to your designated beneficiaries. They can phone our Call Center or notify us by mail. Either way, we will also need a certified copy of your death certificate. You and your loved ones can find more information in our Getting Your Affairs in Order and a Guide for Survivors (VO1874) publication.

Life Changes: A Guide for Retirees (VO1705)

Check out this publication for information about other benefits you may be entitled to and the services we offer retirees.

Sunshine on the Retirement Savings Horizon

Headlines in recent years offer a stormy retirement forecast: “Americans Get a Grade C in Retirement Readiness,” “More Than Four in Ten Households Wrong About Retirement Readiness,” “The Shockingly Small Amount Americans Have in Retirement Savings.”

Unfortunately, research and statistics tend to back up these dire warnings. According to the Pew Charitable Trusts, a significant portion of Americans — 42 percent — lack access to an employer-sponsored retirement plan such as a 401(k), 403(b) or 457(b). Among those whose employers do offer a plan, only 49 percent actually participate.

In fact, research from the Federal Reserve suggests that 28 percent of people who haven’t retired yet have no retirement savings whatsoever. So, it’s not surprising that a report from the Schwartz Center for Economic Policy Analysis predicts that the “number of 65-year-olds per year who are poor or near poor will increase by 146 percent between 2013 and 2022.”

The Good News

There is promising news about retirement, though, if you look for it. Americans — particularly Millennials (those born 1979 through 1996) — are starting to save for retirement much sooner than previous generations. According to the TransAmerica Center for Retirement Studies, Millennials begin to put away for retirement at a median age of 22. Generation X workers waited until 27, and Baby Boomers didn’t start until age 35.

Sunshine on the Retirement Savings Horizon

Perhaps this earlier focus on saving is responsible for other good news. For example, Fidelity Investments reports record 401(k) balances in 2016: $92,500 at the end of the fourth quarter, which is up $4,300 from 2015. And, earlier this year, the Employee Benefit Research Institute found that 55.4 percent of investors — more than ever before — are maxing out their individual retirement account (IRA) contributions.

That said …

Americans do have a retirement problem. New York State Comptroller Thomas P. DiNapoli speaks regularly about the need for policies at the state and federal levels of government to ensure retirement security for everyone, including workers in the private sector.

As individuals, the solution is simple: We need to save, and we need to start early. NYSLRS members have the rare advantage of a well-funded, defined-benefit pension. However, your pension and Social Security benefits are only part of a well-rounded financial plan. Consider contributing to a New York State Deferred Compensation Plan (NYSDCP) account. NYSDCP is a voluntary retirement savings plan — similar to private sector 401(k) or 403(b) plans — created for employees of New York State and other participating employers. If you work for a local government employer, please check with your human resources administrator to find out what savings plans are available to you.

What Unused Sick Leave Might Mean For You at Retirement

If you’ve accumulated unused, unpaid sick leave, you may be able to use it toward your NYSLRS pension benefit.

New York State employees are eligible for this benefit. You also may be eligible if your employer has adopted Section 41(j) for the Employees’ Retirement System (ERS), or 341(j) for the Police and Fire Retirement System (PFRS), of Retirement and Social Security Law. Not sure? Ask your employer or check your Member Annual Statement.

Here’s How It Works

Your additional service credit is determined by dividing your unused sick leave days by the number of work days in a year, which is 260 for most members. Most ERS members can get credit for up to 165 days (7½ months) of unused sick leave. The benefit is capped at 100 days (4½ months) for most Tier 6 members. State employees in certain negotiating units may be able to use 200 days (about nine months). Those extra “months” would be used in calculating your retirement benefit.

Also, depending on your employer, your unused sick leave may be used to cover some health insurance costs during your retirement. Please check with your employer for information about health insurance.

Restrictions

Unused sick leave cannot be used to reach NYSLRS retirement milestones. Let’s say you have 19½ years of service credit. At 20 years, your pension calculation would improve substantially. You also have 130 days of unused sick leave. Can you add the six months of sick leave credit to get you to 20 years? No. Retirement law does not permit it. You’ll have to work those extra six months to get the 20-year benefit rate, though sick leave credits can still be used in your final pension calculation.

Also, credit for unused sick can’t be used to:

  • Qualify for vesting
  • Reach a minimum retirement age
  • Increase your pension beyond the maximum allowed under your retirement plan
  • Meet the service credit requirement for a special 20- or 25-year plan

Check your retirement plan booklet for more information.

Tier 6 Benefits – A Closer Look

Tier 6 members (those who joined NYSLRS since April 1, 2012) are eligible for a lifetime pension benefit with 10 years of credited service. And that pension can replace a portion of your salary throughout your retirement.

Your NYSLRS pension will be based on your Final Average Salary (FAS) and the number of years you work in public service. FAS is the average of the five highest-paid consecutive years. For most members, those higher-paid years come at the end of their careers. Since retirement is still some years in the future for most of you, we won’t focus on the dollar amount of your FAS today. But we can look at what percentage of that salary would be replaced by your pension if you continue in the system until retirement age.

For Tier 6 members of the Employees’ Retirement System (ERS), the benefit is 1.66 percent of your FAS for each year you work, up to 20 years. (Benefit calculations for members of the Police and Fire Retirement System vary based on plan.) At 20 years, the benefit equals 1.75 percent per year (for a total of 35 percent). After 20 years, the benefit grows by 2 percent per year.

Financial advisers say you will need to replace between 70 to 80 percent of your salary to maintain your lifestyle during retirement. Let’s see how we can get there.
Tier 6 Salary Replacement
NYSLRS Pension: Say you begin your career at age 30 and work until your full retirement age of 63. That’s 33 years of Service Credit. You’ll get 35 percent of your FAS for the first 20 years, plus 26 percent for the last 13 years, for a total benefit that would replace 61 percent of your salary. If you started at age 25, and continue till 63, you’d get 71 percent of your FAS. If you didn’t start till age 35, you’d still get 51 percent at 63.

Social Security: You also should factor in Social Security. We know, you may have heard that Social Security might not be there for you, but the situation isn’t that dire. According to the Social Security Administration, under current law, payroll taxes will cover about 79 percent of benefits by 2034. Social Security now replaces about 36 percent of the wages of a typical worker who retires at full retirement age. So even if benefits take a hit – and that’s a big IF – Social Security might still replace around 25 to 30 percent of a typical worker’s pay.

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. If you haven’t already looked into the New York State Deferred Compensation Program, please consider doing so now.

Choosing Your Pension Payment Option

When you retire from NYSLRS, you’ll need to decide how you want to receive your pension benefit.

You’ll have several options. All of them provide a monthly benefit for life. Some also provide a limited benefit for one or more beneficiaries after you die. Others let you pass on a monthly lifetime pension to a single beneficiary. Each option pays a different amount, depending on your age at retirement, your beneficiary’s age and other factors.

Pension Payment Option

That’s a lot to think about, so let’s make this clearer with an example. Meet Jane. Jane plans to retire at age 60, and she has a husband, a granddaughter and a grandson who are financially dependent on her. First, Jane needs to decide whether she wants to leave a benefit to someone after she dies. She does.

That eliminates the Single-Life Allowance option. While it pays the highest monthly benefit, all payments stop when you die.

Jane considers naming her grandchildren as beneficiaries to help pay for their college education.

The Five Year Certain and Ten Year Certain options don’t reduce her pension much, and they allow her to name more than one beneficiary. If Jane dies within five or ten years of retirement, her grandkids would split her normal benefit amount for the rest of that period.

However, the Five and Ten Year options wouldn’t be lifetime benefits. Since her husband doesn’t have his own pension, she’ll leave him her pension and look into a tax-deferred college savings plan for her grandkids instead.

There are a few options that leave a lifetime benefit:

The Joint Allowance — Full and Joint Allowance — Half options continue paying all or half of the retiree’s normal benefit amount to the beneficiary for life.

The Pop-Up/Joint Allowance — Full and Pop-Up/Joint Allowance — Half options also continue the retiree’s normal benefit. They reduce the pension a little more, but they have an advantage: If a retiree outlives his or her beneficiary, the retiree’s monthly payment will “pop up” to the maximum payable under the Single-Life Allowance option.

As you plan for your own retirement, you may also want to consider questions, like:

  • Do you qualify for a death benefit?
  • Do you have life insurance?
  • Do you have a mortgage or unpaid loans that will have to be paid if you die?

These and other factors can significantly impact your retirement planning.

To find out more about pension payment options, check your retirement plan booklet on our Publications page. You can also try our Benefit Calculator, which allows most members to estimate their benefits under the different payment options. For tips on developing a financial strategy that works for you, take a look through Straight Talk about Financial Planning for Your Retirement.

How Much Will My Pension Be?

Estimate Your Pension

For anyone thinking about retirement, one big question looms: How much money will I have to live on after I stop working? Your NYSLRS pension is a lifetime benefit. Having a good idea of what that monthly amount will be is essential to effective retirement planning. Fortunately, we offer tools to help you estimate your future pension.

Most members* can use our Benefit Projection Calculator to estimate their pension. You can use this calculator even if your planned retirement date is a long way off. The calculator provides estimates based on information you enter. By changing each variable (date of retirement, average salary, beneficiary information), you can see the impact it would have on your pension benefit.
how to estimate pension infographic
If you are a vested member who has enough NYSLRS service to be eligible for a pension, you can request a benefit projection by calling our automated information line at 1-866-805-0990 (518-474-7736 in the Albany, New York area). This service is available 24 hours a day, seven days a week.

If you are nearing retirement eligibility and you aren’t certain that you have credit for all of your NYSLRS-eligible employment, complete and submit a Request for Estimate (RS6030) form. If you are a member of the Employees’ Retirement System (ERS), you may use this form if you will be eligible to retire within five years. Members of the Police and Fire Retirement System (PFRS) can submit this form within 18 months of their retirement eligibility date.

As part of your retirement planning process, you may also want to check on your Social Security benefits.

*At this time, you cannot use this calculator if you are in ERS Tier 5 or 6; PFRS Tier 3, 5 or 6; or certain special plans.

Overtime Limits for Tier 5 and 6 Members

The exact formula used in calculating your NYSLRS pension varies by tier and plan, but your credited service and final average salary (FAS) are the core variables. You earn service credit for paid service with participating employers and you also may claim it for some previous public service. FAS is the average wage you earned during the time period when your earnings were highest (36 consecutive months for Tier 5 and 60 consecutive months for Tier 6).

Your FAS can include overtime pay that you earned during the FAS period. However, for Tier 5 and 6 members, there are limits to how much overtime can be used to calculate your pension.

Members and employers aren’t required to make contributions on overtime pay above the limit, and your employer shouldn’t report overtime above the ceiling to us. While you can earn overtime beyond the limit, anything over will not count toward your FAS or your retirement benefit.

Tier 5 Overtime Limits

For Tier 5 Employees’ Retirement System (ERS) members, the limit changes each calendar year. The overtime ceiling for Tier 5 increases each calendar year by 3 percent. This year, the overtime ceiling for Tier 5 ERS members is $18,448.11. In 2018, it will be $19,001.55. For Police and Fire Retirement System (PFRS) members, the overtime limit is 15 percent of your regular earnings each calendar year.

Tier 5 & 6 Overtime Limits

Tier 6 Overtime Limits

For Tier 6 ERS members, the cap follows the fiscal year (April 1 through March 31), not the calendar year. For 2016-2017, the limit is $15,721. Come April that will increase to $16,048. The limit is adjusted for inflation based on the annual Consumer Price Index (CPI). The overtime ceiling for Tier 6 PFRS members is 15 percent of your regular earnings each calendar year.

Find more information about the overtime limit, FAS and retirement calculations in your plan booklet, available on our Publications page.

What to Know About ERS Tier 6

Employees’ Retirement System (ERS) members who join NYSLRS on or after April 1, 2012 are in Tier 6. There are currently 129,359 ERS Tier 6 members who make up 21.1 percent of ERS membership.

ERS Tier 6 Membership Milestones

ERS Tier 6 members need 10 years of service credit to be vested. That means they are eligible to receive a service retirement benefit as early as age 55. The full retirement benefit age is 63, but they can retire between 55 and 63, with a reduced benefit. Tier 6 correction officers, however, can retire with 25 years of service, regardless of age.
ERS Tier 6 benefits

The Final Average Salary (FAS) Calculation

A member’s final average salary is the average of the wages earned in the five highest consecutive years of employment. For ERS Tier 6 members, each year’s compensation used in the final average salary calculation is limited to no more than 10 percent above the average of the previous four years.

Tier 6 Service Retirement Benefit

Generally, the benefit is 1.66 percent of their final average salary for each year of service if the member retires with less than 20 years. If a member retires with 20 years of service, the benefit is 1.75 percent of their final average salary for each year of service, or 35 percent.

If a member retires with more than 20 years of service, they receive 35 percent for the first 20 years, plus 2 percent of their final average salary for each year of service over 20 years.

If you’re an ERS Tier 6 member, you can find out more about your benefits by reading one of the plan publications listed below:

Retirement Planning Tip: Required Minimum Distributions

Required Minimum DistributionsIf you’re putting money into a retirement savings account, you should know that once you turn 70½ years old, you may need to start using those retirement savings. That’s not some oddly specific financial advice; it’s the law. The same federal tax laws that provide for investments like 401(k) plans and individual retirement arrangements, or IRA accounts, also require you to withdraw at least some of your retirement funds as taxable distributions during your lifetime.

Why Take Required Minimum Distributions?

These required minimum distribution rules are intended to ensure that you don’t simply defer taxation and leave these retirement funds as an inheritance. So, once you turn 70½, you need to begin withdrawing a certain amount from your investments each year.

That amount is calculated annually. It’s based on the account’s balance at the end of the previous calendar year as well as a set of actuarial tables that factor in both your age and your beneficiary’s age. Check out AARP’s Required Minimum Distribution Calculator for an easy way to determine your required distributions.

If you don’t take a distribution, or if the amount you withdraw doesn’t meet the requirement, you may have to pay a 50 percent excise tax on the amount not distributed. Required minimum distributions are never eligible for rollover into other retirement accounts; you must take out the money and pay the taxes.

What Accounts Require Minimum Distributions?

Most retirement accounts you’re familiar with require these annual withdrawals:

  • IRAs (traditional, SEP and SIMPLE)
  • 401(k) plans
  • 403(b) plans
  • 457(b) plans
  • Profit sharing plans
  • Money purchases.

Since contributions to Roth IRAs are not tax-exempt, the IRS does not require distributions from Roth IRAs at any age. For beneficiaries who inherit a Roth IRA, certain minimum distribution rules do apply.

As with most things investment-related, a lot depends on your particular circumstances. If you have questions, contact your financial advisor or your plan administrator.

Your Checklist to Apply for Retirement

After months of planning and preparation, you’re ready to apply for retirement. To get your pension benefit, you need to send in a NYSLRS retirement application. Let’s look at what you should include with the form to help make the retirement process go more smoothly.

Filling Out the Retirement Application

Unless you’re filing for a disability retirement, you’ll need to fill out the Application for Service Retirement (RS6037). Some items to keep in mind when you fill out the form:

  • Know your registration number. You can find this number on your most recent Member Annual Statement or retirement estimate.
  • Know your past employment. Please list your public employment history, including military service and any memberships in other New York public retirement systems. This helps ensure you receive the proper credit for your public service.
  • Include your beneficiary’s information. This isn’t an official designation, but will help us provide you with the pension payment options available to you.
  • See a notary. The form must be filled out completely and signed by a notary public.

Applying for Retirement

Proof of Birth

Make sure we also have proof of your birth date. You can send it with your retirement application or before or after, but pension benefits cannot be paid without it. We’ll accept photocopies of the following as proof:

Other Forms to Consider

You’ll need to choose your payment option before your pension is payable. Option election forms are available on our website, but we will also send you a form after we process your retirement application. If you choose an option that would provide a pension benefit to a beneficiary upon your death, you must provide us with proof of your beneficiary’s birth date.

Your NYSLRS pension isn’t subject to New York State income tax, but it is subject to federal tax. You can fill out a W-4P form to tell us what amount you want withheld from your monthly benefit. You can change your federal withholding status at any time. We don’t withhold other states’ income taxes. Visit the Retired Public Employees Association’s website to see if your benefit will be taxed in another state.

You can enroll in our direct deposit program at the same time you file for retirement. Just fill out a Direct Deposit Enrollment Application (RS6370) and return it to us. Once your final retirement benefit amount is determined, your payments will be directly deposited into the account you specified on your enrollment application. Direct deposit is the fastest and most secure way for you to receive your pension benefits. We will send you information on your direct deposit payment amount including deductions, and will inform you when the amount changes.

If you’re divorced and your ex-spouse is entitled to part of your pension, you should send us a copy of your Domestic Relations Order (DRO) as soon as possible. We cannot finalize your pension until we have reviewed your DRO and calculated the required distribution of your benefit. The DRO gives us specific instructions on how your benefits should be divided. For more detailed information, please read our Guide to Domestic Relations Orders.

If you have other questions about applying for retirement, read our publication, Life Changes: How Do I Prepare to Retire?