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Pension Maximization

CalSTRS Retirement Benefit

CalSTRS logoThe California State Teacher’s Retirement System (CalSTRS) is California’s second largest public employee pension fund and serves an estimated 2 percent of California’s population. Your CalSTRS retirement benefit is considered a defined benefit pension. Once you have five years of service credit, you will be eligible for a guaranteed lifetime retirement benefit that is based on the below formula:

Service Credit x Age Factor x Final Compensation = Retirement Benefit

This formula has been set by law. If you find that this benefit is not enough, you can increase your retirement benefit by increasing one or more of the elements in the formula.

Here is a breakdown of the components of the formula:

Service Credit – This number reflects the accumulated time you have received creditable compensation and made contributions to the Defined Benefit Program. This is credit for actual service, but in some instances it can also include credit for time accumulated during employer-approved leaves of absence.

Age Factor – This is the percent of final compensation you are entitled to for each year of service credit. The percentage of final compensation is calculated by the date you became a CalSTRS member and your age on the last day of the month in which you retired.

Final Compensation – This component is typically calculated one of two ways: If you are a member under CalSTRS 2% at 60 and retire with 25 or more years of service credit, your highest one year earnable compensation will be your final compensation component. If you retired with fewer than 25 years of service credit, you will likely use your three highest consecutive year compensation.

Retirement Benefit – To determine your final retirement benefit, multiply the three factors together. This will calculate your Member Only Payout Option which is the max or unmodified payout. The retirement benefit will be reduced if you elect a beneficiary payout option. The three beneficiary payout options are 100 percent beneficiary, 75 percent beneficiary, and 50 percent beneficiary. The reduction in payout is determined by the age of the beneficiary and the beneficiary payout option elected.

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Benefit Enhancements

There are several benefit enhancements that you may be eligible for. Each benefit enhancement will increase your total monthly retirement benefit:

Career Factor – If you are a member under CalSTRS 2% at 60 and you retire with 30 or more years of earned service credit, you can add a career factor of 0.2 percent to your age factor. This can be added up to the maximum combined age and career factor of 2.4 percent.

One-Year Final Compensation - If you are a member under CalSTRS 2% at 60 and you retire with at least 25 years of service credit, your final compensation calculation will be based on your highest average earnable compensation for 12 consecutive months.

Longevity Bonus - If you have earned at least 30 years of service credit on or before December 31, 2010, a set dollar amount will be permanently added to your monthly retirement benefit. There is no required retirement date to earn this special bonus.

CalSTRS and CalPERS Plans