What Is a CalSTRS or CalPERS Pension?
A CalSTRS or CalPERS pension is a defined benefit plan. Your retirement income comes from a formula based on your service credit, your age when you retire, and your final compensation. The size of your account balance doesn't determine your monthly benefit.
Service Credit × Age or Benefit Factor × Final Compensation
CalSTRS2% at 60Hired before Jan 1, 2013
CalSTRS2% at 62 (PEPRA)Hired on or after Jan 1, 2013
CalPERS2% at 55 (Classic)Member before Jan 1, 2013; most school employers
CalPERS2% at 62 (PEPRA)Member on or after Jan 1, 2013
What This Means
- Your pension is based on years of service, age at retirement, and final compensation
- Final compensation is generally your highest average pay over 12 or 36 consecutive months, depending on your system and formula
- More years of service and a later retirement age generally mean a larger benefit, up to your formula's maximum age
CalSTRS exception: members under the 2% at 60 formula with 25 or more years of service credit may have their final compensation based on their highest 12 consecutive months.
How Much of My Income Will My Pension Replace?
For many members, a pension covers a large share of retirement income but not all of it. The difference between what you'll need and what your pension pays is your retirement income gap.
Income Needed − Pension Income = Retirement Income Gap
Illustration only. Your pension's share depends on your formula, service credit, and retirement age.
- A common planning rule of thumb is to replace 70% to 90% of your pre-retirement income
- Pension replacement rates vary widely by formula, years of service, and retirement age
Once you know roughly what percentage of your pay your pension will replace, the size of the gap becomes much easier to plan around.
How Does the WEP and GPO Repeal Affect Me?
The Social Security Fairness Act, signed in January 2025, repealed two rules that had reduced Social Security benefits for many public employees with a government pension.
Windfall Elimination ProvisionWEP reduced your own Social Security benefit if you also received a pension from work that didn't pay into Social Security.
Reduced benefitNo longer reduced
Government Pension OffsetGPO reduced or eliminated Social Security spousal and survivor benefits for people receiving a government pension.
Reduced or eliminatedNo longer reduced
Many CalSTRS educators don't pay into Social Security through their teaching work, while many CalPERS school employees do. Your benefit depends on your own work history and, if you're married, your spouse's.
Not sure how the repeal applies to you? Bring your Social Security statement to your review and we'll go through it together.
What Are My Options to Close a Retirement Income Gap?
CalSTRS and CalPERS each offer ways to add to your retirement income, and many school employers offer supplemental savings plans. Which options make sense depends on your timeline, budget, and goals.
CalSTRSDefined Benefit Supplement- Funded by earnings for service beyond one year in a school year, plus certain other compensation
- Earns a minimum interest rate set by CalSTRS
- Paid as a lump sum, annuity, or combination, depending on eligibility
Both Systems403(b) and 457(b) Savings- Tax-advantaged accounts funded through payroll deduction
- Consistent contributions over time can help narrow your gap
Both SystemsPurchasing Service Credit- Available in specific situations, such as prior service or redepositing withdrawn contributions
- Can increase your lifetime pension, but costs vary, so compare before you buy
Both SystemsAdjusting Retirement Timing- Each additional year adds service credit
- Your age factor increases until it reaches your formula's maximum
How LifePath Helps
We look at your pension alongside your savings, Social Security, and taxes, then help you decide when and how to draw income from each. That includes pension estimates, income gap analysis, coordinated planning, and managing your 403(b), 457(b), and other accounts with your income plan in mind. Meet the LifePath team
