Financial Planning for Retirement

Ideally, financial planning for retirement should begin well before your retirement date.  As a CSU retiree you will receive retirement income from both CalPERS and Social Security , as well as health benefits in retirement.  Whether or not this income is sufficient for you and your dependents - if any - to live securely in retirement securely depends on many factors including how long you live, the state of your health (or that of your dependent(s)), the possible need for long-term care, etc.

Since everyone's situation is different it is impossible to make specific recommendations.  However, it is an excellent idea to consult with anindependent financial planner as early as possible so that you can position your assets optimally for retirement.  Note that truly independent financial planners receive income only from the fees that they charge.  They do not sell any financial products such as investments, insurance, or annuities.  There are many Certified Financial Planners who are not truly independent.  To guarantee that you are working with a truly independent financial planner, it is best to choose one who is a member of NAPFA (The National Association of Personal Financial Advisors).  Be sure to discuss the issue of the possible need for long-term care with your financial planner.

As you approach your projected retirement date, you should take part in one of the "Planning for Retirement" workshops offered by CalPERS or the campus Human Resources Office.  These workshops explain in detail all of the options you have relating to how you receive your CalPERS annuity.  While you will begin to receive your CalPERS retirement annuity as soon as you officially retire, you may choose to delay the start of your Social Security retirement benefits depending on your age at retirement and whether or not you plan to work in the Faculty Early Retirement Program (FERP).

Note that people in FERP are retired, and as such receive both their CalPERS retirement annuity and their teaching salary while they actually are teaching.  Those in FERP do not pay Social Security taxes on their FERP income, and those who have been in continuous active service with the CSU since before April 1, 1986 also pay no Medicare Tax on their FERP earnings.  Those in FERP should be aware the the combination of their FERP income and their CalPERS retirement annuity may place them in a higher tax bracket, and that the standard deductions for state and federal income taxes from both sources of income may not be sufficient to cover their annual tax bill.

Note also that while the Social Security cost-of-living adjustment is made at the beginning of each calendar year, the cost-of-living adjustment for your CalPERS pension does not begin until your second year of retirement.  In addition, different rules apply for how the CalPERS pension COLA is calculated.  More information about this is available on the CalPERS website .  (Insert COLA in the search box to find the COLA fact sheet.)