If you are a California resident with a career in public service, you should become familiar with the California Public Employee’s Retirement System or CalPERS. CalPERS has provided retirement benefits and health security for public service employees for more than 80 years, becoming the nation’s largest public pension fund. The CalPERS pension fund serves more than 1.7 million members.
Overview of benefits provided by CalPERS
There are a wide variety of retirement benefits and other services provided by CalPERS to public employees. Here are a few examples:
- California Employers’ Benefit Trust (CERBT)– CERBT is a Section 115 Trust fund dedicated to prefunding Other Postemployment Benefits for all California public agencies.
- Death Benefits- Upon the death of an active member or retiree, benefits are provided to their beneficiaries or survivors.
- Deferred Compensation (401k, 457, etc.)– The CalPERS deferred compensation plans include Supplemental Income 457 and Supplemental Contributions..
- Disability & Industrial Disability– CalPERS offers disability retirement and industrial disability retirement, depending on whether the disability is job-related. Benefits are determined by the member’s employer, occupation, and specific provisions in the contract between CalPERS and the employer.
- Retirement– CalPERS covers state, school, and contracting local public agency employees. Retirement benefits are calculated using a defined formula based on the member’s years of service credit, age at retirement, and final compensation.
Why you should create a retirement plan
A common misconception is that social security benefits and a 401k provide all that is needed to have a comfortable retirement. That is not the case for most people. In reality, to have a secure retirement you need to be proactive with your retirement and not depend on government benefits.
Effects of unforeseen medical expenses
Another important reason to plan ahead is that future medical expenses are often hard to predict. As we age, the occurrence of medical issues generally increases. With that comes an increase in health care expenses. Without appropriate financial support, the increase in medical expenses can result in a significant financial burden. For this reason, your retirement benefits should be supplemented with long-term insurance in order to help finance your health care needs.
What you should know about early retirement
The earliest you can begin collecting retirement benefits through Social Security is age 62. But, the longer you put off collecting those benefits the larger your payments will be. Put another way, unless you wait until you reach “full retirement age,” which is now 67, you will not receive the maximum retirement benefits to which you are entitled. If you were born before 1960, then the established full retirement age depends on your year of birth.
Retirement Planning Mistakes to Avoid
For many clients, the thought of retirement increases the anxiety that comes with getting older. Concern that you will not have enough income to retire comfortably may be hindering you from getting started. You should not be too concerned to start. With the help of your estate planning attorney, you can make the right choices about your retirement benefits as long as you have established your retirement goals.
Don’t forget to update your retirement plan
Just like any other plan or set of goals, circumstances can change that require you to review and revise your retirement plan, at least every couple of years. It becomes necessary in certain situations to make changes when your income or expenses change, or when there are significant life changes, like birth, death or divorce.
Be sure your retirement goals are reasonable
Your average person has no idea how much income they are likely to need in order to maintain their current lifestyle after they retire. Some people assume they will need more income or savings than they really do. This can make their retirement goals practically unachievable. On the other hand, if your retirement goals are too low, you will inevitably have financial problems later in life, which is more often the case.
Using IRAs are part of your retirement plan
Individual Retirement Plans (IRAs) are a simple way to start retirement planning, while still managing to save and invest for your future. IRAs are basically investment accounts that provide certain tax benefits. An IRA offers a reliable way to set aside money for retirement, while avoiding taxes on the earnings you receive from the retirement account. Those earnings can instead be reinvested so that your account can grow. Once you reach retirement age and begin making withdrawals, your tax obligation will depend on the type of IRA, your income and the amount of your withdrawals.
If you have questions regarding retirement benefits, or any other retirement planning needs, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.