CSU-ERFSA California State University Emeritus and Retired Faculty & Staff Association.

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Planning for Retirement

Ideally, planning for retirement should begin well before the date that you expect to retire.  There are many issues to consider when contemplating retirement.  These may include financial considerations, healthcare considerations, whether you plan to remain where you currently are living or plan to move, and the possibility that you may need long-term care at some future date.  And, most importantly, what you plan to do in retirement.

In addition, CSU emeritus faculty and staff members or have certain privileges on their home campus. These vary from campus to campus but may include among others: library privileges, a complimentary or reduced rate parking pass for emeritus faculty and staff members, the opportunity to maintain a campus email account, and certain information technology support services. Check with your local campus retiree organization or campus president's office to determine what privileges are available for retirees at your home campus.

As part of your planning for retirement, we encourage you to follow the CalPERS Retirement Planning Checklist that is available online, starting a year or more before you plan to retire.

Financial Planning for Retirement:

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 from CalPERS in retirement.  Whether or not this income is sufficient for you and your dependents - if any - to live securely in retirement 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 an independent 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 your 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 (for faculty) 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 that 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.)

Choosing your retirement date:

Most CSU campuses and CalPERS offer excellent workshops on planning for retirement. You should attend at least one of these during the year before you plan to retire. You also can request an estimate from CalPERS of your retirement benefit. In addition to attending campus and CALPERS sponsored workshops on retirement planning, you should begin to follow the CalPERS Retirement Planning Checklist at least one year before you plan to retire

The list contains several useful guidelines, including links to tools that will help you to construct different scenarios to see the impact of age, final salary, and years of service on your retirement allowance. It also shows how the various retirement options, such as continuing benefits for your surviving spouse, will affect your monthly allowance.

An equally, if not more important, resource for choosing your retirement date is your campus Human Resources office. They can help you determine whether it is worth working an extra semester or year to reach an extra year of age and/or service credit. Most faculty members retire at the end of the academic year. (Since the CalPERS age credits increment quarterly, it may be to your advantage if you plan to retire at the end of the academic year to wait until you reach that date during the summer to actually retire.) Human Resources can help you determine which date is more beneficial for you. If you plan to enter FERP and also wish to teach summer school, you will need to pick a retirement date that is after the end of the summer session that you teach. The situation is further complicated for 12-month Chairs and other such employees who can “cash out” unused vacation hours, but only if they move directly into retirement after the last day of their 12 month contract.

Health insurance considerations:

If you retire on or after your 65th birthday, you will be required by CalPERS to enroll in either traditional Medicare (Parts A & B) plus one of the CalPERS supplement to Medicare PPO plans (which also will include pharmacy benefits (Medicare Part D)), or to enroll in one of the Medicare Advantage (HMO) Plans offered by CalPERS (these include pharmacy benefits). It is important that you do not enroll in an independent Medicare Part D pharmacy benefit plan. If you retire before age 65 and your CalPERS health care benefits have vested, you will be eligible to continue your existing CalPERS basic health plan or to choose a new one during open enrollment until you reach age 65, at which time you will need to enroll in Medicare. Health insurance coverage for your dependents will be determined by their ages, and may include either CalPERS basic plans, Medicare, or a combination.

Note that several of the CalPERS basic HMO and Medicare Advantage HMO plans are restricted to certain geographic areas. This may be a consideration if you plan to relocate in retirement. Check with the CalPERS website to see what plans will be available where you plan to live in retirement.

Also note that while Medicare premiums will be deducted from your Social Security payments, CalPERS will reimburse you for the basic Medicare premium automatically. If your overall income is high enough so that you need to pay an additional Medicare premium CalPERS may reimburse you for all or part of the additional premium if there is any surplus in your CalPERS health benefits account (this will depend on the number of dependents you have who are covered by CalPERS health plans. The reimbursement is not automatic. It has to be applied for each year through a letter to CalPERS that includes a copy of your annual Medicare statement. Check our News & Views page for more information.

Tax considerations:

As noted previously, it is important to realize that Social Security withholds no money for federal or state income taxes unless you send in a specific form for that purpose.

Since CSU retirees generally receive income from two or more sources including CalPERS, Social Security, FERP salary, investments, etc., the total amount withheld from these sources may not be sufficient to cover annual state and federal income taxes.  This situation can be addressed either by requesting higher deductions on your CalPERS and Social Security income, or by paying quarterly estimated tax to the state and federal governments.  Consult with your tax advisor to determine which approach is best for you, but be aware that if you pay too little in taxes during the year through deductions and quarterly estimated tax payments you may be subject to penalties.

Have a plan:

In addition to the considerations listed above, it's important to have a plan for what you actually want to do during retirement. This can include the pursuit of hobbies, travel, recreation, volunteer work, community service, even a second career. Check our links page for more useful information. In addition, our CSU-ERFSA president Bill Blischke has collected a list of CSU volunteer activities that some of our members have engaged in.

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