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Inflation Protection

Annual Benefit Adjustment

Under state law, you’ll receive an automatic benefit increase equal to 2 percent of your initial benefit (base allowance) beginning September 1 after the first anniversary of your retirement. Your retirement date must be before September 1 to receive the annual benefit adjustment on September 1 of the next year.

The amount of your adjustment will appear in your October 1 payment. Adjustments are not compounded or tied to changes in the cost of living.

For members who retired before January 1, 2014, the Legislature can reduce or eliminate the amount of the annual benefit adjustment if economic conditions dictate. However, the Legislature has yet to reduce the 2 percent annual benefit adjustment in the 42 years since providing this adjustment.

Under the CalSTRS 2014 Funding Plan, the 2 percent annual benefit adjustment cannot be reduced for members who retire on or after January 1, 2014.

Purchasing Power Protection

Your retirement benefit has additional purchasing power protection. Purchasing power is a measurement of how your retirement benefit keeps pace with inflation. For example, if your benefit stays the same but prices double, your purchasing power is only 50 percent of what it originally was.

In addition to the annual benefit adjustment, one-year supplemental benefit payments, paid in quarterly installments, support your retirement benefit’s purchasing power. CalSTRS makes these payments to retired members and beneficiaries whose benefits have fallen below a certain level of purchasing power. Purchasing power protection level is currently set at 85 percent of your initial benefit (base allowance).

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