Did you know that your retirement benefit factor changes every three months? If you’re thinking about retiring in the next few years, you should learn how your retirement benefit is calculated so you can decide the best date to retire.
CalPERS is a 401(a) defined benefit plan. This means that your retirement benefit amount is determined by a simple formula. To be eligible for service retirement, most CalPERS members must be at least age 50 or 52 with a minimum of five years of CalPERS-credited service. Once you’re eligible and you retire, your benefit is payable to you for life.
Your Retirement Calculation Formula
Service Credit x Benefit Factor x Final Compensation = Unmodified Allowance
- Service Credit is your years of service.
- Benefit factor is the percent of final compensation based on your age at retirement.
- Final Compensation is an average of your highest monthly pay rate.
We use the three factors above to calculate your retirement benefit. When you retire, we multiply your years of service credit by your benefit factor, then multiply that by your final compensation, which gives your unmodified allowance. The unmodified allowance is the pension you earn over your career and is the highest amount you can receive when you retire.
Benefit Factor and Birthday Quarters
Your benefit factor is the percentage of pay you’re entitled to for each year of service credit based on your age at retirement. It’s based on the retirement formula contracted by your employer.
Once you reach your eligible retirement age, your benefit factor increases with each quarter year of age (or every three months based on your birthday) until you retire. This is what’s known as your “birthday quarter.”
For example, if your birthday is March 10, your birthday quarters are:
- Birthday – March 10
- ¼ year – June 10
- ½ year – September 10
- ¾ year – December 10
This means that your benefit factor increases for each quarter year of age that you delay your retirement after your earliest allowable retirement date, up to the maximum age determined by your retirement formula.
Example Benefit Factor – State or School 2% at 55
|Age||Birthday Year||1/4 Year||1/2 Year||3/4 Year|
Want to Learn More?
We have resources for you. If you’re unsure of your earliest retirement age or benefit factor percentage, or have any other questions about your retirement formula, you can find information on the home page in your myCalPERS account or check with your employer. Find your benefit factor chart and more information in your member publication.