Retirement Benefits

5 Factors to Consider Before Retiring Early

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While the average age of CalPERS retirees at retirement (PDF) is nearly 59 years old, here are five factors to keep in mind before you consider leaving your job with a CalPERS-covered employer.

1. Early Retirement Means a Smaller CalPERS Retirement Benefit

There’s no way around it — the younger you are at retirement age, the lower your benefit payment will be. Consider these three factors your retirement calculation formula is based on:

  1. The total number of years you worked for a CalPERS-covered employer (known as service credit).
  2. Your highest average annual compensation during any consecutive 12-month or 36-month period of employment (known as final compensation).
  3. The age you are when you retire.

Check out our Benefit Factor Charts to compare how different retirement ages — and the retirement formula based on your membership date with each employer — affect the percentage of pay you’ll receive.

Keep in mind your total benefit payment will vary significantly if you are a classic or Public Employees’ Pension Reform Act (PEPRA) member.

2. You May Lose the Power of Time and Compounding Interest From Your Investments

Have you saved enough — and given your investments ample time to grow — to supplement your CalPERS pension? When you retire early, your savings may have to last longer.

Depending on your employer, you may be able to enroll in a CalPERS Deferred Compensation plan or through Savings Plus if you’re a state employee. Consider enrolling in a plan for additional monthly income.

3. You May be Too Young for Medicare

With a few exceptions, most people don’t qualify for Medicare until age 65. Learn how your CalPERS Health Plan works with Medicare.

4. Your Social Security Benefits Could Take a Hit

If you’re eligible for Social Security, you will receive a reduced benefit for each year before you retire before reaching the full retirement age. For example, if you were born in 1960 or after, your full retirement age is 67.

Let’s say you plan to retire at 62, which is the minimum age to claim retirement benefits under Social Security. This means your monthly benefit would be reduced by 30%. If you were to wait until age 65, it drops down to a 13.33% reduction. Make sure to calculate the differences in benefit amounts so you’re aware of what the best option is for you.

Visit Your Retirement Age and When You Stop Working to learn more.

5. You Might Get Bored — But You Can Also Keep Working

You’ll have a 40-hour weekly time gap upon leaving the workforce. This could be a much-anticipated opportunity to kick back and explore other fields.

To fill that time, you might consider supplementing your retirement by working for a non-CalPERS employer, or working part time for a CalPERS-covered employer. If you decide to work for a CalPERS-covered employer, you must meet the conditions of returning to work as a retired annuitant, including waiting 180 days after your retirement date unless you qualify for an exception.

Your Retirement Age Is Ultimately Your Call

While the minimum retirement age for most CalPERS members is 50 or 52 with five years of service credit, make sure you’ve carefully planned your finances before submitting your retirement application.

Check out our “Planning Your Financial Future” series on YouTube for tips to make the best of your retirement. If you have questions specific to your situation, don’t hesitate to make an appointment with one of our retirement counselors, either virtually or in person.