The golden question for CalSTRS pensioners is: Do you have enough to retire to live the retirement dreams you have always had?  403b’s can get you there.

The percentage of pre-retirement income that CalSTRS replaces depends on several factors, including years of service, age at retirement, and final compensation. Generally, CalSTRS aims to replace about 60-70% of a teacher’s pre-retirement income, but this can vary significantly based on individual circumstances.

Here are some key points to consider:

  1. Years of Service:

Benefit Formula: CalSTRS uses a benefit formula that includes a service credit (years of service), a benefit factor (percentage based on age at retirement), and final compensation (average salary over a period).

Typical Replacement Rate: For teachers with 30 years of service, CalSTRS might replace around 60-70% of their final salary. However, for those with fewer years of service, the replacement rate will be lower.

  1. Age at Retirement:

Age Factor: The benefit factor increases with age. For instance, retiring at age 60 gives a higher benefit factor compared to retiring at age 55.

Full Retirement Age: To maximize the benefit, many teachers aim to retire at or after age 62, where the benefit factor reaches its peak.

  1. Final Compensation:

Calculation: Final compensation is typically calculated as the highest average salary over a three-year or one-year period, depending on the teacher’s employment status and options chosen.

Impact: Higher final compensation leads to a higher pension benefit.

Example Calculation

For a teacher with 30 years of service and a final compensation of $75,000:

  • Service Credit: 30 years
  • Benefit Factor: Approximately 2% at age 60
  • Final Compensation: $75,000

The annual benefit would be:

30 years x 2% x $75,000 = $45,000

This represents 60% of the final compensation.

Do you already have a 403b?  Pay close attention to how much you’re saving out of your pay check in pretax dollars and how the 403b is performing.  We have a great IRA salary reduction tool to determine how much you can save and still get the right take home pay here.

By supplementing the CalSTRS pension with a 403(b) plan, teachers can enhance their retirement income, helping to bridge any gaps and ensure a more comfortable retirement.

If you are not earning at least 16% annually on your IRA click the link below.

Teachers Retire Young With a Good 403b click here to see them.


1. CalSTRS Member Handbook:

CalSTRS Retirement Benefits

2. CalSTRS FAQs:

Frequently Asked Questions