Understanding your retirement benefits will help you make important decisions about your finances.

When you retire, you'll need income. For most educators, retirement income will come from savings and pension.

Plan on your pension

As an educator in the State of California, you pay into CalSTRS/CalPERS, which is a pension.

Both CalSTRS and CalPERS are traditional defined benefit plans that provide retirement, disability, and survivor benefits. Your retirement benefit is based on a formula set by law, so you'll want to make sure to understand how it is calculated.

It is also important to note that your pension will not cover 100% of the income you need to live on in retirement. Your benefit is calculated by years of service and other factors. The essential thing to know is that for most people, their pension will cover only about 50% to 65% of the income they will need in retirement.

Social Security benefits–You may not qualify

Educators do not pay into the Social Security system while they are employed. This means that you will not receive Social Security benefits for the time you are employed as an educator.

But you may still qualify for Social Security benefits based on other employment, or as a spouse, widow, or widower of someone who is covered. However, there are two rules that may reduce any Social Security benefits you may be eligible to receive because of your CalSTRS pension benefits:

1. The Windfall Elimination Provision (WEP) affects Social Security benefits that are based on your earnings. Social Security uses a different formula to calculate benefits for people who receive a pension from work where Social Security taxes were not taken out of their pay, generally resulting in a lower Social Security benefit.
2. The Government Pension Offset (GPO) affects your spousal, widow, or widower Social Security benefits that are based on your spouse's earnings. The GPO reduces the amount of your Social Security spouse's, widow's, or widower's benefits by two-thirds of the amount of your CalSTRS pension. Go to the Social Security Administration for more details: https://www.ssa.gov/planners/retire/gpo-calc.html

Personal savings

To help make sure you have enough income to live on in retirement, it is important to start a personal retirement savings plan, such as a 403(b).

CTA has developed a retirement savings plan to help ensure that educators have access to a high-quality, low-cost retirement savings plan. There are many savings plans you can use, but many have high fees, surrender charges, and commissions.

The CTA retirement savings plan has none of these costs and many advantages.