State of California Retirement Benefits

Are your state of California Retirement benefits enough?

If you work for the city or state, you may be paying into CalPERS depending on your eligibility. Membership is mandatory only for those who meet specific eligibility criteria, such as full-time employment for more than six months or part-time work (50% or more) for one year. Other employees, such as some part-time or temporary staff, may have different eligibility rules or work for an agency that has a different retirement system.

State of California Retirement Benefits

Most retirees will find that their retirement pension won't be enough. That's why employees fill in the gap with other products we'll be discussing within this article.

Calculate Retirement Amount

Here's your CalPERS calculation. The CalPERS retirement formula is calculated by multiplying three factors: service credit, benefit factor, and final compensation.

If you are retiring under the "2% at 55" formula with 25 years of service and a final compensation of $4,500 per month, the calculation would be:   

25 (years) x 0.02 (2% benefit factor) x 4,500 (final compensation) = $2,250 per month

CalPERS Retirement System

Note that depending on your career, your CalPERS retirement may have a different formula so it's best to login to your CalPERS account. But, typically most people will earn anywhere from 25%-55% less in retirement than when working.

If you took a 50% pay cut in retirement, how would that affect your retirement years?

While the state employees retirement system is a good start, it could leave you needing much more in retirement. So what are your options for the a

Retirement Savings Account

Things to consider:

1. Tax-deferred or tax-exempt retirement products

2. Volatile vs safe retirement accounts

Employees will typically invest in 401k, 457, or 403b, depending on which career they're in and what their options are. The challenge is these are volatile products. They are affected by the market.

Retirement accounts like the indexed annuity can offer growth with minimal to no risk. For larger annual investments starting at around $25,000 annually you may want to look at this tax-free retirement account.

Living Benefits

Other things to consider is to protect yourself in case of a critical illness like heart attack, cancer, or stroke. Medical bills can increase in older age, so having protections is important. If God forbid, you have a heart attack or another critical illness, wouldn't it benefit you to get a check for $50,000, $100,000 or more?

While the CA public employees retirement fund is a good start, it's not typically enough. To fill in the gaps, please book a free no obligation consultation here.