Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Comparison tables scroll horizontally on smaller screens.
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.
Estimate a CalSTRS benefit from age, service credit and final compensation: CalSTRS retirement calculator.
Put your own numbers through the CalPERS formula: CalPERS retirement calculator.
Another California system with its own decision page: UCRP retirement decisions.
A Los Angeles County system with its own decision page: LACERA retirement decisions.
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; not confirmed against a CalSTRS page).
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.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here — you stay on this page.
What happens when you press the button
It asks about nine questions — age, investable assets, location — then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
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.
Payment options and the survivor election
CalSTRS separates two things that are easy to blur. “To provide a lifetime monthly benefit to someone when you die, you can elect an option at retirement”, a different decision from the one-time death benefit. The choice is paid for by a smaller check while the member is alive.
| Choice | What a beneficiary receives after the member dies | If the beneficiary dies first |
|---|---|---|
| Member-Only Benefit | Nothing monthly to a beneficiary; the benefit stops at death | Not applicable |
| 100% Beneficiary Option | 100% of the amount the member was receiving | Benefit rises to the Member-Only Benefit |
| 75% Beneficiary Option | 75% of the amount the member was receiving | Benefit rises to the Member-Only Benefit |
| 50% Beneficiary Option | 50% of the amount the member was receiving | Benefit rises to the Member-Only Benefit |
The Member-Only Benefit “is usually the highest monthly benefit available when you retire”. The Compound Option lets the member “Name two or more option beneficiaries, with an option choice for each”.
The cost is stated as a formula. “An option provides you with a reduced retirement benefit, or Modified Benefit”, and the page gives it as “Member-Only Benefit x Option Factor = Benefit Amount”. The factor depends on both ages and the option chosen, and the page points to the Member Handbook tables for examples, so no factor is assumed here.
What the survivor share means in dollars can still be shown. A computed example from an assumed $3,000 monthly allowance, not a CalSTRS figure: the 75% option pays the beneficiary 75% of the amount the member was receiving, so 75% of $3,000 gives a computed $2,250 a month, and the 50% option gives 50% of $3,000, a computed $1,500 a month.
Who can be named is limited. “Your option beneficiary must be a person”. For someone other than a spouse or former spouse, the page cites federal law and says that under the 75% option the person “cannot be more than exactly 19 years younger than you”. The page sets a ten-year limit for the 100% option under the Compound Option. The trade-off is compared in single life versus joint and survivor.
Timing is the hard edge: the deadline to change or cancel the election on the Service Retirement Application is 30 days from the date the first benefit payment is issued, after which “your option election is irrevocable, except under certain limited circumstances”. Afterward the page lists “only under four circumstances” for changing the beneficiary: the beneficiary dies, a divorce or nullity judgment, a later designation of a spouse or partner, and a later marriage or domestic partnership. In each case the original option itself cannot be changed, and a new beneficiary’s election takes effect six months after CalSTRS receives it. A later marriage must be at least one year old. After a divorce cancellation, “the amount that your benefit was previously reduced will not be reimbursed to you”.
For the before-retirement election, “Your spouse or registered domestic partner must sign your form” or the member must return the “Justification for Non-Signature of Spouse or Registered Domestic Partner” form. The page also warns: “If you cancel or change your preretirement election of an option before retiring, your retirement benefit may be reduced for life”. Spousal waiver rules generally are covered in spousal consent to waive a joint and survivor annuity.
A refund ends the designations: “Any option beneficiary or one-time death benefit designation will be canceled”. The Defined Benefit Supplement page says “Your Defined Benefit Supplement funds are yours when you begin receiving a monthly retirement or disability benefit”.
The pages read do not state the option factor values, whether the service retirement application itself needs a spouse’s signature, any payout choices for the Defined Benefit Supplement balance, or a reduction rule beyond the age-based factor.
Sources for this section:
- CalSTRS, member handbook page: https://www.calstrs.com/member-handbook
- CalSTRS, electing an option: https://www.calstrs.com/electing-an-option
- CalSTRS, Defined Benefit Supplement program: https://www.calstrs.com/defined-benefit-supplement-program
- CalSTRS, refund of contributions: https://www.calstrs.com/refund-of-contributions
What could not be verified
The verdicts, COLA, service-credit and refund findings above rest on the Education Code alone and were not cross-checked against the CalSTRS Member Handbook, so handbook page and section numbers and plain-language framing are unverified for them. The survivor section above was read from CalSTRS pages and cites them. Statute adds detail on the survivor election: post-1/1/2007 retirees choose among 100%/75%/50% beneficiary-continuance options (Ed. Code §24300.1) with an actuarially reduced member allowance, and the exact reduction formula is 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 the death of the option beneficiary (the member gets 6 months to re-elect a new option and beneficiary, §24323), divorce or 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.
Sponsored advisor-matching link. We may earn compensation if you submit the third-party form. Compare fees, scope, conflicts, credentials and fiduciary duty before hiring. Affiliate Disclosure.
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.
The same COLA, vesting and buyback questions, other systems: Maryland MSRPS, Minnesota PERA, Missouri MOSERS, Missouri PSRS, New Jersey PERS, New Mexico ERB and New Mexico PERA.