If you work for the State of California, a school district outside CalSTRS, or one of the local agencies that contracts with CalPERS, the CalPERS pension is probably the base of your retirement income. Before you plan around it, you need to know what it offers and what it doesn't.
No lump sum
CalPERS pays the pension as a monthly allowance with no lump sum option. When you retire you pick a payment option that decides what your beneficiary gets, and then you get a monthly check for life. There's no window where you can take the present value as cash.
That's different from corporate plans under ERISA and from some other state systems. Texas TRS has a Partial Lump Sum Option, and Ohio's OPERS has a partial lump sum option payment. CalPERS has nothing like them.
When CalPERS does pay a lump sum
Refund on separation. A member who leaves all CalPERS-covered employment can take a refund of their own contributions plus interest. That ends membership and every CalPERS benefit, vested or not. The employer's contributions are never refunded.
Death before retirement. If you die before retiring, your beneficiary may receive a refund of your contributions, and depending on your service and family, an eligible survivor may be able to choose a monthly allowance instead. Keep your beneficiary designation current in myCalPERS, especially after a divorce.
The CalPERS benefit formula
The pension formula is: years of service credit times your benefit factor times your final compensation.
The benefit factor depends on your formula and your age when you retire. CalPERS publishes a chart for each formula. Some examples:
- State miscellaneous 2% at 55: 1.1% at 50, 2.0% at 55, rising to 2.5% at 63 and older
- PEPRA miscellaneous 2% at 62: 1.0% at 52, 2.0% at 62, rising to 2.5% at 67
- Local miscellaneous 2.7% at 55: 2.0% at 50, rising to 2.7% at 55 and older
Safety formulas run higher. CalPERS's charts include 3% at 50 and 3% at 55 for some safety members, and 2% at 57, 2.5% at 57 and 2.7% at 57 among the newer safety formulas.
Final compensation is your highest 12 or 36 consecutive months of pay, depending on your employer's contract for classic members. PEPRA members use 36 months.
An example: a state miscellaneous member on 2% at 55 retires at 58 with 28 years and $95,000 of final compensation. The factor at 58 is 2.188%. Pension: 28 x 2.188% x $95,000 = about $58,200 a year, or $4,850 a month before taxes.
Classic against PEPRA
The Public Employees' Pension Reform Act split CalPERS for everyone first hired on or after January 1, 2013. PEPRA members generally have lower factors, later retirement ages and a 36-month final compensation. The PEPRA miscellaneous factor is 2.0% at 62 and climbs to 2.5% at 67, while a classic local member on 2.7% at 55 already has 2.7% at 55.
The gap is big. A 30-year classic member on 2.7% at 55 retiring at 55 gets 81% of final compensation. A 30-year PEPRA member retiring at 55 gets a 1.3% factor, or 39%. PEPRA members can't retire before 52.
Miscellaneous and safety
Miscellaneous covers most state and local workers. Safety covers law enforcement, firefighters and certain other protective jobs. Safety formulas pay more per year because those careers tend to be shorter. A classic member on 3% at 50 with 30 years at 50 gets 90% of final compensation, the cap for that formula.
Estimating your benefit
CalPERS has a benefit estimator in myCalPERS that uses your real service credit, salary and formula. The CalPERS calculator on this site works without a login for the common formulas. For a decision, use the myCalPERS estimate.
Vesting and deferred benefits
Most members vest after 5 years of service credit. State Second Tier members need 10. Once vested, you can leave and collect a pension later, as long as you don't take a refund. Your service stops growing when you leave, but the years you earned stay credited.
Social Security
Some CalPERS positions pay into Social Security and some don't. Your pay stub shows OASDI withholding if yours does. The Social Security Fairness Act, signed January 5, 2025, repealed the Windfall Elimination Provision and Government Pension Offset for benefits payable after December 2023, so a CalPERS pension no longer cuts any Social Security you earned elsewhere. Check your my Social Security account to confirm.
Working longer
With no lump sum, the main lever is your retirement date. On 2.7% at 55, retiring at 55 with 25 years pays 67.5% of final compensation. Staying to 60 with 30 years pays 81%. On a $90,000 final compensation, that's $12,150 a year more for life, though you'd give up five years of pension checks to get it. Use the CalPERS calculator at /state/california to compare dates.
Payment options
When you retire, you choose how the allowance is paid. The Unmodified Allowance pays the most and stops at your death. The optional settlements pay you less so that something continues after you: Option 2 continues 100% of your reduced allowance to your beneficiary and Option 3 continues 50%. Options 2W and 3W add a pop-up, so your allowance rises to the unmodified amount if your beneficiary dies first. Option 1 returns any remaining contributions after your death, and Option 4 lets you design a custom survivor benefit.
The reduction depends on your age, your beneficiary's age and the option. Your retirement estimate shows each one. The choice is permanent once CalPERS processes your retirement.
COLA
CalPERS raises allowances every May, starting the second calendar year after you retire. Retire in 2026 and your first COLA comes in May 2028. The COLA is the lesser of inflation or your employer's contracted maximum, compounded. School and first-tier State retirees have a 2% maximum, Second Tier State retirees get a fixed 3%, and public agencies can contract for 2%, 3%, 4% or 5%. CalPERS says 95.9% of its retirees have the 2% provision.
At 2% compounded, a $4,000 allowance reaches about $4,876 after 10 years, $5,944 after 20 and $7,245 after 30. If inflation averages 3%, a 2% COLA still loses about a quarter of its purchasing power over 30 years. CalPERS adds a Purchasing Power Protection Allowance when the COLA falls behind, holding benefits to at least 75% of original purchasing power for State and school retirees and 80% for public agency retirees.
A private pension with no COLA paying $4,000 would buy 45% to 59% less after 30 years of 2% to 3% inflation.
What the pension is worth
Because there's no lump sum, members tend to undervalue the pension. Value it anyway. Run a $4,500 a month allowance starting at 60 through our present value calculator with the 2026 IRS 417(e) rates and mortality table and it's worth about $730,000 with no COLA. Add a 2% annual COLA and it's about $893,000. Use the pension present value calculator with your own figures.
CalPERS pensions are taxable. Federal income tax applies, and California taxes them as ordinary income at rates up to 13.3%. Use the pension income tax calculator to see your after-tax income.
Buying service credit
CalPERS lets members buy some kinds of service credit, including certain military service, some earlier public service and redeposits of refunded contributions. Each year adds your age factor times final compensation to the annual pension: on 2.7% at 55 and $90,000, that's $2,430 a year, with COLAs. The cost depends on the type of service. If $40,000 bought two years that add $4,860 a year, you'd recover the price in about 8 years. You can pay by payroll deduction, a lump sum or a rollover from a 457(b) or 403(b). Purchases have to be completed before you retire, so ask for a cost estimate early.
457(b) savings
The 2026 457(b) limit is $24,500, plus $8,000 at 50 or older ($11,250 instead at 60 to 63) (IRS Notice 2025-67). Withdrawals from a governmental 457(b) after you leave your job aren't hit with the 10% early withdrawal tax, at any age. That makes it a good bridge if you retire before your factor peaks.
Reciprocity
If you move between CalPERS and a reciprocal California retirement system, such as the University of California Retirement Plan or a county system under the 1937 Act, your service can count toward eligibility in both, and the final compensation from the later job can be used by both systems. You generally have to start the new job within six months of leaving the old one. CalSTRS isn't a reciprocal system, though members moving between CalPERS and CalSTRS jobs can sometimes elect to stay in their original system.
Applying
CalPERS doesn't start your retirement for you. You apply, choose your payment option and name your beneficiaries. After you retire, CalPERS waits for your employer to report final pay and service before it finishes the calculation, and pays an estimated allowance in the meantime, with an adjustment when the final figure is set. Check with payroll before you leave that the pay items they report are ones CalPERS counts, because disputes over special pay slow everything down.