Tag Archives: planning for retirement

Now is a Good Time to Review Your Retirement Savings

Saving for retirement? Under Internal Revenue Service (IRS) rules, you’ll be allowed to contribute more to your retirement savings account during 2019.

If you’re having part of your pay deposited directly into an employer-sponsored retirement savings account, such as New York State Deferred Compensation, you’ll be able to contribute up to $19,000 next year. That’s up from $18,500 for 2018. If you’re over 50, catch-up provisions allow you to save up to $25,000. The old limit was $24,500.

Even if you’re nowhere near the contribution limit, this is good time to review your retirement savings strategy. Are you saving enough to meet your retirement goals? Can you save more in 2019? And if you aren’t saving for retirement, now’s the best time to start.

Review Your Retirement Savings

Why Save for Retirement?

Financial experts say you’ll need 70 to 80 percent of your pre-retirement income to maintain your lifestyle during retirement. Retirement savings can supplement your NYSLRS pension and Social Security, helping you reach that 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.

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 are a NYSLRS member but do not work for New York State, check with your employer to see if you are eligible. (Deferred Comp is not affiliated with NYSLRS.)

Once you sign up for Deferred Comp, 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.

With a tax-deferred savings plan, the impact on your paycheck will be less than the amount going into your account. (Deferred Comp even has a calculator to help you estimate the impact.)

You may also eligible for a Roth account, which lets you make contributions in after-tax dollars. In exchange for paying taxes upfront, your savings grow tax-free and you pay no taxes when you withdraw the funds in retirement. This approach may be advantageous for younger workers in lower tax brackets.

Spending Budgets Change in Retirement

What are some of the changes you can expect in retirement? Sleeping in past 8 a.m.? Shopping during regular business hours? Retirement can bring many changes, but one you should be aware of is how your spending could change.

According to an Employee Benefit Research Institute (EBRI) study, average spending goes down in retirement, but not for everyone. Some households’ expenses stayed the same while others increased. In the first two years of retirement, almost 46 percent of households spent more than what they had spent just before retirement. EBRI offered a suggestion for this trend – people may want to splurge on hobbies or vacations during the first few years of retirement.

Keep in mind, the EBRI study is meant to understand trends in retiree spending, but it brings up a good question. Have you thought about how you’ll spend money in retirement?

Prepare a Post-Retirement Budget

As you get closer to retirement, you may be saving and investing more to meet your financial goals. Making the switch from saving to spending in retirement can be easy if you plan ahead. By looking at how you spend your money now, you can get an idea of how to spend your money in retirement.

When you set a post-retirement budget, look at what your expenses currently are. Don’t forget to include periodic expenses, like car insurance payments or property/school taxes. Track how you spend your money over a month or two. Then, consider your current monthly income and your post-retirement income. Your current monthly income should cover your current expenses, so estimate what your post-retirement income will be. If your post-retirement income is less than your current income, you might want to adjust your expenses or even your retirement plans.

These worksheets can help you prepare a budget and list out your post-retirement income sources. Print them out and start planning ahead for post-retirement spending.

Monthly budgeting worksheets (PDF)

Monthly Worksheets (PDF)