If you are a California Public Employee, you must have heard of “CalPERS”.
Yes, It’s Your Retirement Plan.
Today we are going to talk about how this Pension System Works.
CalPERS Pension is calculated using the Main Total 3 Ingredients.
Formula of CalPERS Pension
Service Credit × Benefit Factor × Final Compensation = Your Monthly Pension
Service Credit
Simply, this is the number for the number of years you have worked for any CalPERS-Covered Company.
This includes part-time work.
The more years you work, the higher your service Credit and the bigger your pension will be.
( This number reflects your time and dedication on the job )
Benefit Factor
This is the magic ingredient in the CalPERS formula!
This Factor is a percentage that is determined by your age at retirement.
This is super important.
Your Specific Benefits Factor is tied to your retirement formula, which is determined by your employer’s contract with CalPERS (like, “2% at 55”)
If you understand the “2% at 55” formula, you get 2% of your final compensation for each year of service if you retire at 55.
( Your Age at Retirement has a direct and powerful impact on your final pension amount )
Final Compensation
This is a snapshot of your highest earnings.
This is an average of your highest monthly earning salary over the last 12 months.
The higher your monthly salary, the more you will see an increase in your pension.
( Your pension is calculated using your highest salary, reflecting your career growth )
Example
A state employee named Lucy is about to retire.
Her CalPERS Formula – 2% at 55
Service Credit – 25 Years
Final Compensation – $6,000/month
Retirement Age – 55
Lucy retired at the age of 55, so the “2% at 55” formula will be used in her pension.
This will make her Benefit Factor 2%.
25 Years × 2% × $6,000 = $3,000
So, Lucy will get $3,000 Monthly for Life (Before taxes and other deductions).
CalPERS Pension Calculator
If you want to skip this Maths and Calculate your Pension Fast and Easily, you can use our “CalPERS Pension Calculator” tool.
This tool is absolutely Free and Easy to use.
CalPERS Pension Calculator