As a participant in the California State Teachers' Retirement System (CalSTRS), you are eligible for a defined benefit pension – a guaranteed income for life – upon retirement, provided you meet all the necessary requirements.
With the strength of CalSTRS behind you – 856,000 members and assets nearly than $155 billion – you are assured of a future that includes a guaranteed retirement benefit.* Your CalSTRS benefits are secure, despite what might be happening in the economy. It's important for you to understand how your benefits are calculated, however, in order to make the most of this valuable defined benefit pension plan. Here are some of the highlights.
If you are a full-time employee of the California public school system and perform creditable service, you are automatically enrolled in the CalSTRS Defined Benefit Program on your first day of employment. Part-time employees performing creditable service may participate in an alternative retirement plan called the Cash Balance Benefit Program, instead of the DB Program, if your employer offers it to you.
Learn more about the Cash Balance Benefit Program.
Contributions to the Plan
- You contribute 8% of your creditable compensation. This is withheld from your paycheck.
- Your employer contributes an amount equal to 8.25% of your creditable compensation.
- The state of California contributes 2.017% of your creditable earnings. However, this amount is calculated from the fiscal year ending in the previous calendar year, not on your current compensation.
How Interest Is Credited
Interest is credited to your balance (made up of accumulated contributions and interest) at the end of each fiscal year. For the Defined Benefit Program, the current rate approximates the yield on two-year U.S. Treasury notes; for the Defined Benefit Supplement Program, the current rate approximates the 30-year Treasury rate. The rates through June 2010, compounded daily, are 2% for the Defined Benefit Program and 4.25% for the Defined Benefit Supplement Program (these rates change with the prevailing rates).
However, the interest credited to your account is important only if you quit teaching and decide to take a refund of your contributions. The amount of money in your account has no bearing on the benefit you receive in the DB Program.
How Your Benefit Is Calculated
There are three elements to calculating a member-only defined benefit:
Age Factor x Service Credit x Final Compensation =
Member-Only Retirement Benefit
The age factor is the percent of final compensation to which you are entitled for each year of service credit, determined by your age on the last day of the month in which your retirement is effective. It is set at 2% at age 60. The age factor is decreased if you retire before age 60 and increased to a maximum of 2.4% if you retire later than age 60. If you retire with at least 30 years of earned service credit, a 0.2% career factor will be added to your age factor, up to a maximum age factor of 2.4%.
Service credit is the accumulated period of time, in years and partial years, during which you receive creditable compensation for service as a member of the Defined Benefit program.
You may be able to purchase service credit or receive additional credit for unused sick leave.
CalSTRS estimates that the median benefit replaces 60% to 65% of a CalSTRS member's pre-retirement income. The average monthly member-only benefit is $4,329.**
When Can You Retire?
- As early as age 50 with at least 30 years of service credit.
- At age 55 with at least five years of service credit.
The median age at retirement for CalSTRS members is 61.3.
How to Make the Most of Your CalSTRS Pension Benefits
Each year, you'll receive a Retirement Progress Report from CalSTRS. This information will help you determine what your eventual benefits might be. However, you don't need to wait for your statement to take action.
CalSTRS offers a free Benefit Counseling Service. You can meet with a counselor in person or on the phone to review your benefits and answer any questions you may have. Go to www.CalSTRS.com for more information about scheduling a counseling session.
CalSTRS also offers workshops to help you prepare for retirement. The four core workshops are:
- Demystifying CalSTRS – if you're an early career educator.
- CalSTRS Fundamentals – if you are 10-15 years from retirement.
- CalSTRS Retirement Check-Up – if you are 3-5 years from retirement.
- Retirement Income Management – if you are age 45 or older, or are already retired.
Learn more about CalSTRS workshops online. You can also estimate your CalSTRS benefit online
* Source: CalSTRS, www.calstrs.com.
** Source: "Fast Facts," Fiscal Year Ended June 30, 2008, CalSTRS.