STRS Formula

HOW TO CALCULATE YOUR RETIREMENT BENEFIT

Your monthly CalSTRS service retirement benefit is determined by a formula, as follows:

Benefit Formula
(Age Factor x Service Credit x Final Compensation) + Longevity bonus (if applicable) = Retirement Benefit (unmodified)

Click here to go to the CalSTRS.com Benefits Calculator

Example Retirement

Teacher Final Compensation = $55,000
$55,000 X (30 Years X 2.0% Age Factor @ 60) = 60% + Longevity Bonus $200.00 per Month

$55,000 X 60% = $33,000 + $2400 (Bonus) = $35,400 or 35% less than final salary.

What is Final Compensation?
Final compensation is the highest average annual compensation earnable by a member during a specified period of time of paid employment covered by CalSTRS. The annual compensation earnable for a school year is based on the gross monthly pay rates that could have been earned for credited service. Overtime compensation is not included. Your gross monthly pay rate earnable per pay period is multiplied by the number of months in which you received compensation. If you plan to retire before the end of the school year, the annual compensation earnable for that year is prorated to your retirement date.
Beginning January 1, 2006-2007, if you retire with at least 25 years of earned service credit, CalSTRS will search the most recent 15 years of salary information to find the highest 12 consecutive months. If you retire with less than 25 years of earned service credit, CalSTRS will search the most recent 15 years of salary information to find the highest consecutive three years of creditable earnings. If your highest final compensation period occurred more than 15 years ago, you must specify the time period on your retirement application.
Nonconsecutive final compensation is available for those members who received a salary reduction due to a decline in school funds. Upon certification from the employer, CalSTRS will use any three nonconsecutive school years to determine final compensation.
If you are an eligible classroom teacher with less than 25 years of earned service credit, final compensation based on 12 consecutive months also is available for eligible classroom teachers if it has been included in a written collective bargaining agreement and all costs are paid by the employer, the employee or a combination of the two.

What is the longevity bonus and how do I qualify?
The longevity bonus provides an increase in your unmodified retirement benefit if you have accumulated at least 30 years of qualified service credit by December 31, 2010. The following longevity bonus amounts are paid based upon the total of credited service you have earned.

Do I need to retire on or before December 31, 2010, to qualify for a longevity bonus?
No. You must have at least 30 years of qualified service credited to your account by December 31, 2010, to qualify. You may continue to work and increase the amount of the longevity bonus your are entitled to.

For example: If you have 30 years of qualified credited service by December 31, 2010, and retire in 2013, you will have 32 years of qualified credited service and will be entitled to a bonus of $400.

I will have less than 30 years of qualified service credit by December 31, 2010. Is there any way I can increase my qualified service credit to become eligible for the longevity bonus?
Yes. You may redeposit previously withdrawn contributions or purchase permissive service credit to use towards longevity bonus eligibility. Any qualified service credit you wish to use for the longevity bonus must be paid in full by December 31, 2010.

Benefit Formula
(Age Factor x Service Credit x Final Compensation)
+ Longevity bonus (if applicable)
= Retirement Benefit (unmodified)

What is the Age Factor?
If you have at least 30 years of service credit you can retire for service at age 50 in the CalSTRS DB Program with a monthly benefit . You may retire at age 55 if you have at least five years of service credit.
Based on your age at retirement, the age factor is the percent of pay to which you are entitled for each year of service credit. This percentage is determined by your age on the last day of the month in which your retirement is effective. At age 60, specified as the "normal retirement age", the age factor is 2 percent. If you retire before age 60, your age factor is reduced for each month your retirement age is below age 60. Your age factor increases with each quarter of retirement age above age 60. If you retire at age 63 or older, you are entitled to a maximum 2.4 percent age factor.
A 0.2 percentage point career factor will be added to your age factor if you retire with at least 30 years of earned service credit up to a maximum age factor of 2.4 percent. For example, if you retire at age 60, your age factor would be 2 percent. If you had at least 30 years of earned service credit, your benefit would be equal to 2.2 percent of pay for each year of service credit. Because the maximum age factor, with the career factor, cannot exceed 2.4 percent, if you had at least 30 years of credited service, you would reach the maximum 2.4 age factor, including the career factor, at age 61 years and 6 months.

What is Service Credit?
There are two kinds of service credit: credit based on service during your career, sometimes called credited service or earned service credit, and credit that is not associated with actual service. Credited service counts towards becoming eligible for the various benefit enhancements, such as highest year final compensation, the career factor and the longevity bonus. The most common type of credited service is the credit you earn for working in a public school. If you work full time during the year, you receive one full year of service credit. If you work part of a year, you will receive partial service credit. Other types of credited service include service that was previously performed in a California public school and subject to CalSTRS coverage, but during which you elected not to be a CalSTRS member (such as substitute or part-time teaching) and permissive service credit (such as maternity or paternity leave, sabbatical leave, out of state public school teaching and family care or medical leave).

Credit not associated with service does not count towards qualifying you for benefit enhancements, such as the career factor. This type of service includes unused sick leave, service credit granted to members who retire during a specified prior of time designated by the employer (known as the Golden Handshake) and nonqualified service (known as "air time"). Although this service does not count towards eligibility for benefit enhancements, it does count as service credit in the basic benefit formula. In addition, the purchase of air time will count toward being eligible to retire at age 50.

Refer to your CalSTRS Annual Statement of Account to determine how much service is currently credited to your account.