Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
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Updated August 19, 2026. Quick answer: California State Teachers’ Retirement System (CalSTRS) — the COLA is automatic, and it does not compound, service credit can be purchased, and no DROP was found. Vesting takes 5 years of credited service. The four decisions below are the ones that are hard to reverse.
Provisional. This page is published at medium confidence. The specific points that could not be confirmed are listed under What could not be verified below, and are named rather than smoothed over.
The verdicts
| Is the COLA granted? | Automatic |
|---|---|
| Is the COLA compounded? | Not compounded |
| Vesting | 5 years of credited service, at least 1 year of which was performed since the most recent refund (Ed. Code §24201(a)(1)). |
| Buy service credit? | Yes |
| DROP? | None found |
| State | California |
Those first two rows are separate questions and are routinely confused. Whether you get an increase at all is one thing; whether it compounds is another. A system can grant an increase automatically every year and still compute it against your original pension forever, which is a materially worse deal than it sounds.
The COLA
Statute, verbatim intent: the ‘improvement factor’ is ‘an increase of 2 percent in monthly allowances,’ added each year on September 1, and the statute explicitly states it ‘may not be compounded’ (Ed. Code §22140/22141) — i.e. automatic, simple, flat 2%/year, not requiring case-by-case legislative reauthorization. Separately, the Supplemental Benefit Maintenance Account (SBMA) targets restoring purchasing power up to 85% of the original base allowance using CPI, funded from a dedicated revenue stream and payable ‘only to the extent funds are available’ (not guaranteed) — Ed. Code §§24412-24416.
Buying service credit
PEPRA closed the ‘nonqualified’/airtime-style 5-year service-credit purchase (Ed. Code §22826) to applications received on/after 1/1/2013 — the same date the 2% at 62 (PEPRA) tier began, so unavailable to any PEPRA member. A separate out-of-state deadline (Ed. Code §22828) applied only to June-Dec 2007 retirees requesting by 6/30/2009. Payment: sign/return election within 35 days, full payment within 120 days or the election cancels; redeposits allow up to 120 monthly installments over 10 years (Ed. Code §23203). No statutory mention found of rollover from a 403(b)/457/IRA as a payment method — unconfirmed (statute silent, calstrs.com handbook could not be reached).
What it costs. Board-set ‘contribution rate for additional service credit’ applied against highest compensation from the current or prior two school years (Ed. Code §22801/22803) — not framed in statute as a present-value-of-benefit-increase calculation.
Run your own numbers before deciding — some purchases never recover their cost, and the calculator shows which.
Taking a refund
Refund pays accumulated retirement contributions (post-6/30/1935), accumulated annuity deposit contributions, and Defined Benefit Supplement account balance, plus credited interest (Ed. Code §23100). §23101(a): ‘all rights to benefits pertaining to the service credit represented by those contributions … are forfeited’ until/unless redeposited; §23101(b) invalidates beneficiary designations on refund. Statute text reviewed did not explicitly address retiree-health or disability/survivor-coverage forfeiture separately (plausible, unconfirmed). Redeposit is possible before retirement (Ed. Code §§23200/23203), restoring service credit pro-rata for partial redeposits over up to 120 monthly installments across 10 years — exact interest rate charged could not be confirmed.
This is the irreversible one. Refund versus leaving it in sets out the decision in the order it should be made.
A COLA that does not compound changes what this pension is worth in year twenty.
CalSTRS grants the increase automatically, but because it does not compound, the distance between the first payment and the last widens quietly across a long retirement. That is worth pricing before the retirement date is filed. The matching service below introduces you to advisers who pay to meet you.
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DROP
No DROP program found anywhere in the complete Education Code Part 13 chapter table of contents (Ch. 1-39, §§22000-25115) — an absence-of-evidence finding from a full statutory index review. No calstrs.com page could be checked to confirm an explicit denial because the site blocked automated access.
This is an absence-of-evidence finding: it means a DROP does not appear in the materials reviewed, not that the system has published a denial. DROP is rarer than it appears — of the twelve systems checked for this guide, only one has an active programme.
What could not be verified
MAJOR CAVEAT: calstrs.com refused every request for its pages outright, and its own robots file asks automated readers to stay out. Every finding above is Education Code statute-only and could NOT be cross-checked against the CalSTRS Member Handbook or any calstrs.com page — handbook page/section numbers and plain-language framing are unverified. SURVIVOR OPTIONS / IRREVOCABILITY (not captured by this schema's fields, flagged as highest-stakes): post-1/1/2007 retirees choose among 100%/75%/50% beneficiary-continuance options (Ed. Code §24300.1) with an actuarially-reduced member allowance (exact reduction formula not given in statute). The election is irrevocable except within a 30-day window after the first benefit payment (§24300.1(c)), with narrow statutory exceptions for: death of the option beneficiary (member gets 6 months to re-elect a new option/beneficiary, §24323), divorce/legal separation (§24322), and marriage after retirement (§24321, subject to a 1-year marriage requirement).
These gaps are stated because a plan-rule page that hides its own limits is worse than no page. Your member handbook is the authority, and where it and this page disagree, the handbook wins.
Sources
- Education Code Part 13, State Teachers’ Retirement System, §§ 22000-25115, via leginfo.legislature.ca.gov.
Read 2026-08-04.
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Related: buyback calculator · is buying service credit worth it · refund or leave it in · DROP explained.
General information drawn from IRS, Medicare, HUD and state statute and regulation, not legal, tax or financial advice. Continuing-care law is state law and differs materially between states; every figure here is year-labelled and every source named. Powers of attorney, guardianship and trusts are governed by STATE law and differ change, and interest rates published by the IRS change every month - never rely on a rate quoted on any page, including this one. We are not a law firm or a tax adviser, and this is not legal or tax advice.
Other systems, priced the same way: CalPERS COLA, vesting, buyback and refund, FRS COLA, vesting, buyback and refund, and NYSTRS COLA, vesting, buyback and refund.