Retirement planning can feel overwhelming, especially when there’s so much information (and misinformation) out there. We want to help you make informed decisions about your future by clearing up some of the most common myths we hear.
Let’s set the record straight.
Myth 1: Overtime pay counts toward my pension calculation.
Fact: Overtime pay usually doesn’t count toward your pension and isn’t included in calculating your retirement benefits or pension plan costs, whether you’re a classic or Public Employees’ Pension Reform Act (PEPRA) member.
The only exception is for certain types of overtime pay required by the Fair Labor Standards Act (FLSA). If your regular workweek is longer than what the Department of Labor defines as normal, this extra pay can be counted as special compensation for your pension. This applies to classic safety and miscellaneous members, but for PEPRA members, it only applies to those in the safety category.
Myth 2: My CalPERS pension amount changes depending on investment performance.
Fact: Your pension benefit is determined by a formula, not by market conditions. Once you retire, your monthly payment is based on your service credit, benefit factor, and final compensation. That amount does not fluctuate with investment returns. CalPERS manages investment risk on the back end, so members continue receiving their earned benefits for life.
Myth 3: My pension will automatically adjust for inflation every year.
Fact: CalPERS provides an annual cost-of-living adjustment (COLA), but it does not necessarily match national inflation each year. Your COLA is determined by your employer’s contract with CalPERS, with most employers offering a maximum of 2%, 3%, 4%, or 5% per year.
Between your employer’s COLA cap and the change in the Consumer Price Index (CPI), CalPERS applies the lesser of the two by law. This means your pension adjustment amount may be smaller than the actual rate of inflation in any given year.
Learn more about how the power of compounding growth works to your advantage in our article.
Myth 4: After I retire, I can return to work for a CalPERS employer full-time without restrictions.
Fact: You can return to work for a CalPERS-covered employer, but the type of employment will dictate the restrictions that apply.
Reinstatement: If you return to a permanent full-time or part-time position with a CalPERS employer, you must reinstate from retirement. Your pension payments stop, and you become an active member again, earning service credit for your new employment.
Retired Annuitant: If you work temporarily or part-time under a retired annuitant assignment, you may continue receiving your pension, but there are strict limits (hour caps, waiting period after retirement, pay restrictions, and no additional benefits). Violating these rules can result in termination of pension payments and repayment of benefits, as you and your employer have equal responsibility to ensure your potential employment is lawful by meeting all of the requirements outlined in Employment After Retirement (PUB 33) (PDF).
Myth 5: My beneficiaries will automatically receive death benefits if I pass away.
Fact: To make sure your death benefits go to the person you choose, you need to name a beneficiary, whether you’re retired or still working.
Learn more about updating your beneficiary in our article, and the importance of communicating with your beneficiary in advance.
Getting ready to retire? Get accurate information.
For more information on your retirement benefits, please review your specific member publication, as well as our publication Planning Your Service Retirement (PUB 1) (PDF). Also, feel free to contact us for any specific questions about your retirement journey.