If you teach in California, your CalSTRS pension is one of the best retirement foundations in the country. But “foundation” is the key word. For most teachers, the pension alone does not fully replace your paycheck — and the difference between a comfortable retirement and a stressful one usually comes down to the savings and tax decisions you make in the years before you retire.
This guide walks through how the CalSTRS benefit actually works, why a gap exists for most teachers, and the specific steps you can take to close it.
How the CalSTRS pension is calculated
Your CalSTRS retirement benefit is a “defined benefit” — a guaranteed monthly check for life based on a simple formula:
Service Credit × Age Factor × Final Compensation = Your Annual Pension
- Service credit is the number of years you’ve worked and contributed.
- Age factor is a percentage that grows the longer you wait to retire (it tops out at age 65 for most members under the 2% at 60 and 2% at 62 benefit structures).
- Final compensation is your highest average salary over a defined period.
The result is a pension that, for a long-career teacher, often replaces somewhere between 50% and 70% of final salary. That sounds like a lot — until you remember your salary was already stretched by California’s cost of living.
Why a gap exists for most teachers
There are three reasons the pension rarely covers everything:
1. You’re replacing less than 100% of your income. Financial planners generally target 70–85% of pre-retirement income to maintain your lifestyle. If your pension delivers 55–65%, you have a gap to fill from other sources.
2. Most California teachers don’t collect full Social Security. Many educators have limited or no Social Security earnings history. While the repeal of the Windfall Elimination Provision and Government Pension Offset in 2025 changed the math for many public servants who did pay into Social Security, plenty of teachers still can’t rely on it as a major leg of the stool. Your supplemental savings have to do more work.
3. California’s cost of living doesn’t retire when you do. Housing, property taxes, and healthcare before Medicare eligibility all continue. A pension set in today’s dollars also has to keep pace with inflation over a 25-to-30-year retirement.
The tools that close the gap
The good news: California teachers have access to two powerful supplemental accounts, and 2026 contribution limits are the highest they’ve ever been.
Your 403(b)
The 403(b) is the classic teacher’s supplemental retirement account. In 2026 you can contribute up to $24,500, with an additional $8,000 catch-up if you’re 50 or older (bringing the total to $32,500). If you’re between ages 60 and 63, a SECURE 2.0 “super catch-up” lets you add $11,250 instead — a total of $35,750 in a single year.
There’s also a lesser-known 403(b) perk: if you’ve worked 15+ years for the same employer, you may be able to contribute up to an extra $3,000 per year (up to a $15,000 lifetime maximum) on top of the standard limit.
Your 457(b)
If your district offers a 457(b), you can contribute to it in addition to your 403(b) — a separate $24,500 limit in 2026. That means a teacher with both plans can shelter a very large amount of income in a single year. The 457(b) also has a unique “final three years” catch-up that can let you contribute up to double the normal limit as retirement approaches.
A word of caution on 403(b) vendors
Here’s where many teachers quietly lose money. District 403(b) vendor lists often contain dozens of options — and some are high-fee annuity products that can erode your returns for decades. Because we’re a fee-only fiduciary, we don’t get paid to sell you any plan. We help teachers scan their specific district’s list, identify the low-cost “green light” vendors, and move away from accounts that are quietly eating their returns.
Don’t forget the tax strategy
Closing the gap isn’t only about how much you save — it’s about how the savings are taxed.
- Pre-tax vs. Roth. Pension income is taxable. Layering a large pre-tax 403(b)/457(b) balance on top can push you into higher brackets in retirement. For many teachers, directing at least some savings to a Roth option creates a tax-free bucket to draw from later.
- Roth conversion windows. The years between retirement and age 73 (when required minimum distributions begin in 2026) are often a low-income window where converting pre-tax dollars to Roth at a low rate can save significant taxes over a lifetime.
- Pension option elections. When you retire, you’ll choose between a higher single-life benefit and a reduced benefit that continues to a spouse. That single decision is permanent and worth tens of thousands of dollars — it should be modeled carefully, not chosen under deadline pressure.
Your next step
If you’re a California teacher within ten years of retirement, the most valuable thing you can do is run the numbers now, while you still have time to adjust. We help K-12 and university educators choose pension options with confidence, coordinate their 403(b)/457(b) contributions, and plan the tax-smart drawdown that follows.
Schedule a free 30-minute call and we’ll show you exactly where your gap stands and how to close it.
Rooney Wealth Management LLC is an investment adviser registered with the state of California. This article is for educational purposes only and is not tax, legal, or investment advice. Contribution limits and rules are based on figures published for the 2026 tax year and may change. Please consult your tax or financial professional regarding your specific situation.