February 2016 Issue
January 27, 2016

For your benefit

Source: NYSUT United

Working in retirement

Many NYSUT members choose to continue working, often in a different capacity, once they retire. In addition to the ability to earn money, there are numerous health and social benefits.

Retirees often wonder if working will reduce their Social Security benefits. Here's the skinny:

You can get Social Security retirement benefits and work at the same time. If you are younger than full retirement age (65 to 67 depending on your year of birth) and make more than the yearly earnings limit, the Social Security Administration will reduce your benefit. Starting with the month you reach full retirement age your benefits will not be reduced no matter how much you earn.

Social Security uses the following earnings limits to reduce your benefits:

  • If you are under full retirement age for the entire year, $1 will be deducted from your benefit payments for every $2 you earn above the annual limit. For 2016, that limit is $15,720.
  • In the year you reach full retirement age, $1 in benefits will be deducted for every $3 you earn above the earnings limit; the administration only counts earnings before the month you reach your full retirement age. For 2016, the limit on earnings for the months before full retirement age is $41,880.
  • Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.

For more information, including what counts as earnings and how working may increase your Social Security benefits, visit https://www.socialsecurity.gov/pubs/EN-05-10069.pdf for a brochure all about working in retirement.

Understanding your Final Average Salary

The New York State and Local Employees' Retirement System offers a wealth of useful information online. Several helpful articles are available at the system's blog, www.nyretirementnews.com, including a detailed explainer on understanding your Final Average Salary (FAS).

Your defined pension benefit is based on a preset formula that uses service credit and FAS to determine your monthly benefit. Benefits for members in Tier 1, 2, 3, 4 and 5 are calculated based on a three-year FAS; Tier 6 members receive benefits based on a five-year FAS.

Regular salary, holiday pay and some overtime payments generally count toward FAS. Termination pay, payments for unused sick time or lump sum payments for deferred compensation generally do not count toward FAS.

For more information, visit www.nyretirementnews.com/nyslrs-basics-understanding-final-average-salary/.

Know your retirement budget

Think your expenses will significantly drop once you retire? Think again. A November 2015 study by the Employee Benefit Research Institute found in the first two years of retirement, median household spending decreased 5.5 percent from preretirement spending levels, and by 12.5 percent by the third or fourth year of retirement. However, nearly 46 percent of households (across all income levels) experienced higher spending in the first two years of retirement.

A good way to avoid any budgeting surprises — and maybe some pitfalls — is to accurately determine your pretirement budget. ERS offers budget worksheets at www.nysretirementnews.com/wp-stuff/uploads/2015/12/Worksheets_Monthly.pdf.