CalSTRS is a great start…
But you’ll likely need much more for retirement
CalSTRS is great, but it’s not enough
Your CalSTRS benefit provides a foundation to your retirement strategy, but for most employees of the system, it simply will not produce enough income replacement benefit to live on through retirement.
Under CalSTRS, you will receive a benefit payment throughout your retirement determined by your compensation and years of service. Depending on your hire date, you would typically have to work more than 40 years to receive a retirement benefit equal to your current working compensation.
If you are like many CalSTRS employees who expect to work in the system for 15 – 25 years, your CalSTRS benefit may be closer to 30 – 50% of your current compensation. That’s why you need a strategy to close your retirement income gap. The best strategy is to save more for retirement through your workplace 403(b) plan.
One more reason your CalSTRS benefit may leave you with a retirement income gap:
You likely won’t receive a large enough Social Security benefit to make up the difference
While you’re working in CalSTRS, you’re not paying into Social Security. So, you’ll only be eligible to receive a Social Security benefit if you worked elsewhere and paid into Social Security. But it gets worse:
If you worked for another employer and
Paid Social Security taxes for less than 10 years:
Your Social Security Benefit: $0
If you worked for another employer and Paid Social Security taxes for 10 years, your benefit will only be around 20%. But let’s assume you’ve worked and paid Social Security for 20 years:
Your Social Security Benefit: Only 40% based on IRS rules that limit payments to people covered by state pensions
As you can see, it is very likely your CalSTRS benefit will result in a retirement income shortfall.
Fortunately, your 403(b) plan is an easy way to save for retirement and close the gap.
Ready to enroll?
