Life Changes: How Do I Prepare to Retire from New York?
A Message from Comptroller Thomas P. DiNapoli
As we live longer, many people will find themselves spending up to a third of their lives in retirement. That is why you should consider what you need to do to ensure an enjoyable retirement.
The first step toward a fulfilling retirement is becoming well informed. This booklet provides you with information you need as you begin planning for retirement. It describes some of the resources available to you; presents factors to consider as you plan; takes you step-by-step through the retirement process; and even addresses many post-retirement concerns.
Thomas P. DiNapoli
Understanding Your Benefits
Understanding what benefits you currently have and what you are eligible to receive is an essential part of preparing for retirement. There are several major sources for this information.
When you joined the Retirement System, you were assigned to a tier and retirement plan. You can find specific information about your plan, the benefits you are entitled to receive and when you can receive them on our website. Since our website is updated periodically to reflect changes in the law, visit often to ensure you have the most up-to-date information on your plan.
Your Member Annual Statement
Your Member Annual Statement (MAS) shows the latest information we have for you, including your service credit, salary and outstanding loan balances. For most members of the Employees’ Retirement System, it also includes “Projected Benefits and Retirement Options” — a ballpark estimate of your pension that details each payment option available to you when you retire.
The information on this statement has been reported by your employer(s) and is examined to determine your pension. If there are any errors, have them corrected immediately. If you believe your salary is not accurate, please contact your employer. If corrections are needed, your employer will complete an adjustment report and submit it to us so we can change your salary records.
If you have questions about your statement, our online MAS Tutorial can help. This interactive tutorial includes a page-by-page explanation of your statement, instructions on how to correct or update your information and answers to Frequently Asked Questions.
Laws affecting the Retirement System, and possibly your benefits, can change. We are always offering new pre-retirement planning information to our members. In addition to checking our website, you can get information by reading The Update for Employees’ Retirement System (ERS) members and The Sentinel for Police and Fire Retirement System (PFRS) members. These newsletters are sent to your employer for distribution twice a year and are also available on our website.
At your employer’s request, we offer pre-retirement presentations for members within five years of retirement eligibility. These presentations guide you through the retirement process, explain the benefits you can expect and discuss post-retirement issues. Try to attend one at least 18 months before you plan to retire to get more detailed information on the retirement process.
Our Information Representatives are available to meet with you at 16 locations throughout New York State. While all of our sites have access to your Retirement System records, we encourage you to bring your retirement estimate or your most recent MAS. For consultation site hours and locations, check the consultation site page. To schedule an appointment, contact our Call Center at 1-866-805-0990 or 518-474-7736 in the Albany, New York area.
Retirement Planning Tips
Your Public Employment History — Make Sure Your Credit is Complete
The amount of your pension is directly related to your years of public service, unless you are in a plan allowing you to retire after 20 or 25 years of specific service. When you work for a participating public employer in New York State, you receive service credit. One year of full-time employment is the same as one year of service credit.
While we keep records for all of our members from the date they join the Retirement System, we have no way of knowing if and when our members previously worked for a public employer. If you worked for a public employer before you joined the Retirement System, you may be able to receive service credit for that time.
Paying Off Loans — And How to Avoid a Problem
You cannot pay off your loan after you retire. If you have an outstanding balance when you retire, it will permanently reduce your retirement benefit, and at least some portion is almost always reportable as ordinary income (subject to federal income tax). If you don’t want a permanent reduction, you can increase the amount of your loan repayments or make lump sum payments so your loans are paid before retirement.
Your Final Average Salary (FAS) — Be Aware of the Limits
In addition to service credit, your pension is also directly related to your final average salary (FAS), although there may be limitations.
Generally, your FAS is the average of your highest 36 consecutive months of wages you earned in public employment. For most, this is the last three years of employment (but it can be anytime in your career). Wages are your regular salary, but can also include the following payments:
* Payments for overtime — if earned within the period of time used in the calculation of your FAS;*
* Holiday pay;
* Longevity payments — if earned within the period of time used to determine your FAS;
* Vacation pay (up to 30 days) — if your FAS is based on the last 36 months of salary prior to your retirement (Not available to Tier 1 members who joined on or after April 1, 1972, Tier 2 members or PFRS Tier 5 members).
*For Tier 5 members, the amount of overtime that can be used in an FAS calculation is limited.
PFRS Members Only
Some employers provide a one-year FAS for their PFRS members. A one-year FAS is the regular compensation you earned during the 12 months of actual service immediately preceding your retirement date. (Check with your employer to see if this option is available to you.) Salary, overtime, holiday pay and longevity pay are among the payments considered regular compensation. For more information on what can and cannot be included, consult your retirement plan information on our website. If your three-year FAS is greater than your one-year FAS, we will use the three-year FAS to calculate your pension.
Working Longer — The Question of a Full vs. Reduced Pension
If you are a Tier 2, 3, 4 or 5 ERS member and you work until you are 62, you will retire with a full pension. Tier 2, 3 and 4 members who are 55 or older and have 30 or more years of service credit can also retire with a full pension. However, if you retire before meeting these requirements, your pension is permanently reduced. Since the full amount of your pension is tied to your age and service credit, the closer you are to age 62 when you retire, the less a reduction there will be in your pension.
If You’re Not Working for a Public Employer — Filing at 55 vs. 62
If you are a vested member,* no longer work for a public employer, and do not anticipate returning to public employment, you may want to consider filing your retirement application when you are 55. While there may be a reduction in your pension if you retire prior to age 62, it would take approximately 19 years to recover the benefits you would have received between the ages of 55 and 62, if you wait until age 62 to retire.
On the other hand, if you anticipate returning to public employment, you should evaluate the potential impact on your pension of additional service credit and salary before deciding to retire prior to age 62.
The Retirement Benefit Calculator — A Great Website Tool to Estimate Your Pension
The Retirement Benefit Calculator is available on our website and allows most members to enter different retirement dates, final average salaries and service credit totals to estimate what their pension could be when they retire. By entering a variety of information, you can see the impact additional service credit or delaying retirement may have on your pension. Visit the Retirement Benefit Calculator.
Now that you are seriously considering retirement, there are important things you need to know and do in the months leading up to the big day. Here are just a few steps you can take to avoid hitting bumps in the final stretch of road.
Requesting an Estimate — Your Big-Time Tool for Success
If you are eligible to retire within 18 months, one of the most important things you can do is request an estimate. With your estimate, you can confirm that the information we have for you is accurate. (For example, if you requested credit for previous public employment, make sure it is reflected on your estimate.)
The estimate will show:
* Your approximate FAS (not including vacation pay, future increases in salary, etc.);
* Your total years of credited service;
* Your total member contributions, if applicable;
* Your outstanding loan balances and how much your pension will increase if you pay off the loans before retiring (if applicable);
* The retirement date used to determine your pension;
* The names and birth dates of your current beneficiaries;
* How much your pension will be under each of the retirement payment options; and
* The increase in your pension if you purchase non-member or withdrawn service (if applicable).
The information we have in our records is used to provide you with an estimate of what your pension will be on your estimated date of retirement. Therefore, when you receive your estimate, report any inconsistencies to us as soon as possible. Remember, the figures in the estimate are not final and should be used only as a guide.
After getting your estimate, if you decide not to retire, you may request a new estimate 18 months after receiving the initial one.
Before you can receive any pension benefits, we must have proof of your birth date on file. A photocopy of your birth certificate is acceptable. If we need to see the original document, we will contact you.
Review Your Health Insurance Coverage
Before you retire, check with your employer’s health benefits administrator to determine your eligibility for post-retirement coverage for yourself and your family. (We do not administer health insurance benefits.) The administrator will be able to provide you with information concerning the type of coverage available, the cost, and how much you must pay. If you are not eligible for coverage after retirement or you need supplemental coverage, you should investigate private health insurance well in advance of retiring.
For New York State employees and retirees, the New York State Department of Civil Service administers the New York State Health Insurance Program (NYSHIP). Your health benefits administrator should be able to answer your questions about your coverage as a retiree, or you can visit the Department of Civil Service’s website to learn more.
Early Retirement Incentives — Be Informed and Prepared
Occasionally, and sometimes with little forewarning, the Legislature enacts retirement incentive programs. These incentive programs, which are different from local incentives your employer may offer, could provide additional service credit or allow you to retire before you would normally be considered eligible (sometimes with benefit reductions). It is important to note that the New York State Legislature authorizes the enactment of these early retirement incentive programs. The Retirement System simply administers them. We will notify you and your employer if the Legislature makes an incentive program available.
Retirement Process — Step-by-Step
If your records are in order and you meet the eligibility requirements, the retirement process can be very simple. The following is general information regarding the steps to take once you are ready to retire.
Filing Your Retirement Application — The Form That Makes it Official
You cannot receive your pension unless you file an Application for Service Retirement (RS6037). It is also available from your employer, our consultation offices or our Call Center. Staff members at our consultation sites are notary publics and can help you with your application, if you need it.
The application can be filed up to 90 days before your retirement date. However, it must be filed with us at least 15 days before your retirement date. (Vested members no longer on a public employer’s payroll can file between 90 days and one day before their retirement date.) Do not give your retirement application to your employer. Please send it to us directly.
The Confirmation Letter — You’re on Your Way
Once we receive your application, we will send you a confirmation letter. We will also notify your employer that you have filed for retirement. If you received a formal estimate from us within the past 18 months, we will include three forms with the letter:
* Your W-4P form (Withholding Certificate for Pension or Annuity Payments), so you can choose the amount you want withheld from your benefit each month for federal taxes;
* A direct deposit enrollment form, so you can have your benefit payment automatically deposited into your checking or savings account as soon as we finalize your retirement; and
* An Option Election form, so you can choose how you want your pension paid based on the information supplied in that estimate.
If you have not previously received an estimate, we will send you the W-4P form and direct deposit enrollment form and begin to process your estimate. Once your estimate is completed, we will send it to you with the Option Election form.
The W-4P Form
If you do not submit a completed W-4P form to us, we will still process your retirement application, but the amount of federal tax withheld will be based on the status, “married with three dependents.” You can change your federal withholding tax status at anytime. W-4P forms Adobe pdf are available from our Call Center, consultation sites or website on our Forms page.
Your pension is not subject to the income tax of New York State or its municipalities. However, if you move to another state, it could be taxable in that state. Check with the state where you will be living to see if your pension will be taxable. You can also visit the Retired Public Employees Association’s website for a complete list of states that do and do not tax New York State pensions.
Receiving Your Pension Checks — What to Expect
Since most employers are on a lag payroll, we cannot get certain information (such as your employer’s certification of your unused vacation and sick leave credits) until after you retire. During this time, you may be eligible to receive advance checks (partial payments based on your estimated benefit) until we are able to determine exactly what your pension will be. These checks will be mailed to your home each month, beginning approximately 30-60 days after your date of retirement. Please note, your date of birth must be verified before any payment can be made.
The Direct Deposit Program — The Fastest Way to Get Your Money
You will be enrolled in our Direct Deposit Program at the same time you file for retirement. Just fill out a Direct Deposit Enrollment Application and return it to us. As soon as your retirement benefit is finalized, your payments will be directly deposited into the account you specified on your enrollment application. (If you are eligible for advance payments, these will still be made by paper check.) Direct deposit is quick, easy and safe. In most instances, your money is immediately available and you will not have to rely on the Postal Service to deliver your check or wait in long lines at the bank to cash it. Direct Deposit Enrollment Applications Adobe pdf are available on our Forms page.
Planning Your Post-Retirement Budget
Having a post-retirement budget enables you to decide how you can spend your money once you retire. One of the best ways to plan for the future is to keep track of what you spend now. To help you plan your post-retirement budget, we have included our Monthly Expenses Worksheet and Monthly Income Worksheet. These forms can help you determine how you spend your money over the course of one or two months. Remember to include expenses that occur periodically, such as car insurance, property taxes and school taxes.