Your Retirement Calculation Formula
Service Credit x Benefit Factor x Final Compensation = Unmodified Allowance
- Service creditis your years of service.
- Benefit factoris the percent of final compensation based on your age at retirement.
- Final compensationis an average of your highest monthly pay rate.
We use the three factors above to calculate your retirement benefit. When you retire, we multiply your years of service credit by your benefit factor, then multiply that by your final compensation, which gives your unmodified allowance. The unmodified allowance is the pension you earn over your career and is the highest amount you can receive when you retire.
Calpers Retirement: Vesting Requirement For Health/dental Benefits
In order to qualify for health/dental in retirement, you must retire from a benefit eligible position within 120 days of separation from the CSU AND meet either the five year or ten year vesting requirement. .
- Retirees pay the same health contribution as active CSU employees.
- Dental Retiree plan premium is paid by CalPERS.
- The vision benefit can be continued at the retiree’s expense.
In addition, benefits are provided for disability, death, and to survivors or beneficiaries of eligible members. Exception to Ten Year Vesting Requirement: Disabled employees would receive the full state health contribution if they separate and retire with a disability retirement within 120 days from a benefits eligible appointment.
How Much To Save For Retirement
Naturally, the next question becomes: how much should a person save for retirement? Simply put, it’s an extremely loaded question with very few definite answers. Similar to the answer to the question of whether to retire or not, it will depend on each person, and factors such as how much income will be needed, entitlement for Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.
Below are some general guidelines.
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How Does Social Security Impact My Benefit Calculation
If your employer withheld Social Security taxes from your paycheck, you may be subject to a one-time Social Security offset. This means well reduce your final compensation by $133.33 before your retirement benefit is calculated. This is a one-time reduction and is done before your monthly pension is calculated. The reduction is not applied as a monthly reduction to your pension. For example, if your final compensation is $3,133.33, we would use $3,000.00 in your retirement calculation.
You can find more details and resources on our Social Security & Your CalPERS Pension webpage.
How Much Do Calpers Retirees Really Make
The pay and benefits of public employees is a discussion of increasing relevance to taxpayers. As noted in a CPPC study published earlier this month How Much Do Californias State, City and County Workers Really Make?, in California, personnel costs are estimated to consume 40% of total city budgets, 41% of the state budget for direct operations, and 52% of county budgets. In many cities and counties the percentage is much higher. And these averages dont include personnel costs for outside contractors, nor do they include payments on debt that is directly related to personnel costs, such as pension obligation bonds.
In this environment it is important to present factual information relating to public sector compensation. With respect to retirement benefits, it is helpful to present complete and accurate aggregate data, in order for policymakers and taxpayers to determine whether or not current benefit formulas are fair and financially sustainable. This study analyzes data from CalPERS, using nearly a half-million records obtained from CalPERS for 2012. In particular, this study presents data showing, by year of retirement, what the average pension benefits were in 2012. The study then normalizes these benefits to account for full careers using two benchmarks the public sector full career expectation of 30 years, and the private sector full career expectation of 43 years.
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METHODS AND ASSUMPTIONS TO ACQUIRE DATA
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Whats Used To Calculate My Benefit
While many soon-to-be retirees think their earnings are whats used to calculate their benefits, this isnt correct. Its your pay rate thats used. Whats the difference? Your earnings are your take home pay after deductions, while your pay rate is your gross pay prior to deductions.
You can see an estimate of your retirement benefit right now. Log in to myCalPERS to do an estimate using the latest data we have on record. You can create and save multiple estimates.
Continuing Benefits & Deductions
If you’re currently a member of the CalPERS Health Program, you must meet specific requirements to continue your health insurance coverage into retirement, or maintain the right to re-enroll in the future after retirement.
To continue your CalPERS health benefit coverage after retirement, you must meet both of the criteria below:
- Be enrolled in a CalPERS health plan upon separation from employment, either in your own name or as a dependent
- Retire within 120 days of your separation from employment
If you don’t meet both requirements before you retire, you’ll lose all future rights to be in the CalPERS Health Program. If your family members are included in your CalPERS health plan at the time of your death, their enrollment will continue automatically if they’re eligible for and receive a monthly allowance.
Public Agency or School Members
If your employer doesn’t contract with CalPERS for health benefits, contact your employer to determine if your benefits will continue.
To continue dental coverage into retirement, you must:
- Be enrolled in a state-sponsored dental plan on the date of your separation from employment
- Retire within 120 days of your separation
If you’re enrolled in CalPERS Long-Term Care and have premiums deducted from your paycheck, you’ll need to call 982-1775 before you retire to find out how to continue your premium deductions.
Other Deduction Payments
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How Do Birthday Quarters Affect My Retirement Benefit
Once you reach your eligible CalPERS retirement age, your benefit factor increases with each quarter year of age until you retire.
Did you know that your retirement benefit factor changes every three months? If youre thinking about retiring in the next few years, you should learn how your retirement benefit is calculated so you can decide the best date to retire.
Impact Of Inflation On Retirement Savings
Inflation is the general increase in prices and a fall in the purchasing power of money over time. The average inflation rate in the United States for the past 30 years has been around 2.6% per year, which means that the purchasing power of one dollar now is not only less than one dollar 30 years ago but less than 50 cents! Inflation is one of the reasons why people tend to underestimate how much they need to save for retirement.
Although inflation does have an impact on retirement savings, it is unpredictable and mostly out of a person’s control. As a result, people generally do not center their retirement planning or investments around inflation and instead focus mainly on achieving as large and steady a total return on investment as possible. For people interested in mitigating inflation, there are investments in the U.S. that are specifically designed to counter inflation called Treasury Inflation-Protected Securities and similar investments in other countries that go by different names. Also, gold and other commodities are traditionally favored as protection against inflation, as are dividend-paying stocks as opposed to short-term bonds.
Our Retirement Calculator can help by considering inflation in several calculations. Please visit the Inflation Calculator for more information about inflation or to do calculations involving inflation.
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Have You Checked Your Benefit Factor Chart
No matter where you are in your career, its never too early to plan for retirement by reviewing your CalPERS benefit factor chart to see your potential percentage of pay in retirement.
Lets start with some definitions:
- Benefit factor: This is the percentage of pay you are entitled to receive for each year of CalPERS-covered service. Its determined by your age at retirement and your retirement formula.
- Retirement formula: Your retirement formula is determined by your employers contract with CalPERS . Your retirement formula and your age determine what benefit factor is used to calculate your retirement benefit.
- Final compensation: This is the highest average annual compensation you earned for a 12-month or 36-month consecutive period of employment, depending on your employers contract.
Heres an example calculation:
Carla is retiring at age 55 under the state miscellaneous 2% at 55 formula with 25 years of service credit. Her final compensation average is $4,500 a month.
To estimate her pension amount, Carla multiples her years of service credit by the benefit factor. Then she multiples that result by her final compensation amount:
- 25 years × 2% benefit factor = 50%
- 50% × $4,500 final compensation = $2,250 unmodified allowance
- Note: The unmodified allowance is the highest amount payable when you retire.
Calpers Member Benefit Formulas
State miscellaneous members are those who are employed by the state and the CSU , who are not involved in law enforcement, fire suppression, the protection of public safety, or a position designated by law as industrial, patrol, peace officer/firefighter, or safety.
Your formula is based on your CalPERS membership date and your CSU hire date, as follows
Retirement Benefits ChartRetirement Benefits Chart
Hired by state and new CalPERS member on or after January 1, 2013.
Hired by state and new CalPERS member between January 15, 2011 and December 31, 2012
Hired by state and new CalPERS member prior to January 11, 2011
Salary used to calculate retirement
Average highest 36 months
Average highest 36 months
Average highest 12 months
*Public Safety employees should contact the benefits office for detailed information.
**There are exceptions to CalPERS membership benefit formula eligibility for employees with previous public agency or reciprocal agency employment.
New employees hired by the CSU for the first time into CFA who first become CalPERS members on or after July 1, 2017. Both must happen on or after July 1, 2017.
- Employees working for the CSU prior to July 1, 2017, who become CalPERS members after July 1, 2017, are not subject to the new 10-year vesting period.
- Prior state employment is not considered CSU employment.
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I Submitted My Application Three Months In Advance Why Didnt I Receive My Benefits My First Month As A Retiree
It will depend on the retirement date you selected. Its recommended to submit your retirement application three to four months prior to your retirement date. However, keep in mind that even if you submit your application this far in advance, we pay in arrears. This means if you retire on November 1, you wont receive Novembers retirement check until December 1.
If youve submitted your retirement application less than three to four months in advance, your first payment can be expected approximately 30-45 days from the retirement date or application received date, whichever is later. Around two weeks after your application has been processed, well send you a First Payment Acknowledgement letter, which includes the date youll receive your first retirement check, the amount you can expect to receive, and income tax information.
Special Power Of Attorney
Through the CalPERS Special Power of Attorney, you can appoint a representative to make retirement-related decisions on your behalf, should you become incapacitated. The CalPERS special power of attorney grants authority specifically for CalPERS retirement issues. For this reason, we recommend filing a Special Power of Attorney form , regardless of whether you already have a power of attorney set up through another resource.
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How Do I Select A Retirement Date
The selection of your retirement date is one of the most important decisions to make when planning your retirement.
To create a retirement estimate based on the factors of service, age and salary, see the CalPERS retirement calculator at: and go to online calculator. For a more comprehensive estimate, employees are encouraged to register for a MyCalPERS account which is a secure self-service website where you may access real-time details and balances of your individual CalPERS accounts.
Other Sources Of Retirement Income
Home Equity and Real Estate
For some people in certain scenarios, preexisting mortgages and ownership of real estate can be liquidated for disposable income during retirement through a reverse mortgage. A reverse mortgage is just as it is aptly named â a reversing of a mortgage where at the end , ownership of the house is transferred to whoever bought the reverse mortgage. In other words, retirees are paid to live in their homes until a fixed point in the future, where ownership of the home is finally transferred.
A common way to receive income in retirement is through the use of an annuity, which is a fixed sum of periodic cash flows typically distributed for the rest of an annuitant’s life. There are two types of annuities: immediate and deferred. Immediate annuities are upfront premiums paid which release payments from the principal starting as early as the next month. Deferred annuities are annuities with two phases. The first phase is the accumulation or deferral phase, during which a person contributes money to the account . The second phase is the distribution, or annuitization phase, during which a person will receive periodic payments until death. For more information, it may be worth checking out our Annuity Calculator or Annuity Payout Calculator to determine whether annuities could be a viable option for your retirement.
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Council For Retirement Security
Cost of living Adjustments, or COLA for short, is the equation the Social Security Administration uses to determine increases in Social Security. 2022 Social Security is set to have its biggest increase in years, thanks to COLA.
Seniors will see about a 6 percent increase in their retirement benefits. If youre curious how this affects your personal benefits, it boils down to simple math.
The SSA calculated Social Security itself by using several factors: primarily your average income over a 35-year period and your age. The SSA offers us the ability to do a rough calculation of our own benefits, here. You can get an estimate of your benefits by submitting this form with your birth date, this years earning, the date you plan on fully retiring, and if youd like to see the inflation rate.
Additionally, COLAs themselves are calculated by the SSA reviewing the Consumer Price Index. The SSA announced the COLA for 2022 would be an increase of 6.2 percent.
To determine your own COLA increase, you can look at your current benefits or submit the form to see a rough estimate of them, calculate 6 percent, and then add that amount back to the total to get the new sum.
The equation looks like this: + = My COLA Adjusted Benefit.
Disability & Industrial Disability Retirement
If you have a disabling injury or illness that prevents you from performing your usual job duties with your current employer, you may be eligible for disability or industrial disability retirement. If your disability or industrial disability retirement is approved, you’ll receive a monthly retirement payment for the rest of your life or until you recover from your injury or illness.
|An injury or illness that doesn’t need to be job related||A job-related illness or injury|
Generally, you must have at least five years of service credit to be eligible. members must have 10 years.
Some exceptions apply to the service requirement. Contact us to see if you qualify.
If you’re a patrol member in Bargaining Unit 5 of the Department of California Highway Patrol, you may be eligible for an enhanced industrial disability retirement benefit. You must have sustained a serious bodily injury as the result of a single event and must be unable to participate in substantial gainful employment.
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How Your Retirement Benefit Is Calculated
Three factors are multiplied together to calculate your service retirement:
- Service Credit You earn service credit for each year or partial year you work under CalPERS membership. A full-time employee who works at least 10 months per fiscal year will earn 1.0 years of service credit. Part-time employees accrue service credit on a pro-rated basis.
- Benefit Factor Your benefit factor is the percentage of pay to which you are entitled for each year of service. It is determined by your age at retirement and the benefit formula that you qualify for.
- Final Compensation Final compensation is your average full-time monthly pay rate and special compensation for your 12 or 36 months . The full-time pay rate is used, not your earnings. If you work part-time, your full-time pay rate will be used to determine your final compensation. For example, if an employee works half-time and earns $2,000 per month , the pay rate used for final compensation calculation would be $4,000.
Fast Facts About Calpers Pensions
CalPERS releases the annual Facts at a Glance reports at the end of each fiscal year to provide members, stakeholders, and the public with a wide range of data and information about the state of the pension system.
Here are five facts to know:
- The average pension for all service retirees, beneficiaries, and survivors is $36,852 per year, while service retirees receive $39,372 per year. New retirees who just retired in fiscal year 2020-21 receive $45,516 per year.
- Overall, 59% of all CalPERS service retirees receive less than $3,000 a month. And only 4.9% of CalPERS service retirees receive pensions of $100,000 per year or more they are usually executives who hold seats in either city or county offices, or are physicians, or senior managers for police and fire departments.
- Unlike the private sector, about 33% of CalPERS retirees dont coordinate with Social Security for benefits. Their CalPERS pension may be their sole source of retirement income.
- The average retirement age for all service retirees is 58.7, while the average years of service is more than 20.
- Pensions are funded by both the employees who contribute every month out of their paycheck and the employer contributions, which are invested for fund growth over time. Some workers currently contribute more than 16% of their paycheck.
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