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CalPERS outlines employer-sponsored savings options and value of starting early
Summary
The presentation explained defined-contribution options for public employees — including CalPERS 457 and 403(b) plans and CalHR's Savings Plus — and used a compound-interest example to show the advantage of early participation.
CalPERS advised early-career members to consider employer-sponsored defined-contribution plans in addition to the CalPERS defined-benefit pension. Presenter Raquel Lozano said these plans — for example, a CalPERS 457 plan, 403(b) for school employees, or state CalHR Savings Plus plans — let members set aside a portion of pay pre- or post-tax to grow for retirement.
Why it matters: A pension was described as "one part" of retirement income; defined-contribution accounts can supplement pensions to help members approach recommended replacement rates.
Lozano explained plan availability differs by employer: the CalPERS 457 plan requires the employer to contract for it; school employees may have access to 403(b) plans; state and CSU employees can use CalHR Savings Plus options. The presentation included a compound-interest illustration (7% annual return assumption) comparing three savers: Tracy starting at 21 and contributing $200 per month for 14 years (total at 65: $467,255 in the scenario), Anthony starting at 35 (ending with $246,381 at 65), and Sarah contributing the same amount for her whole career (largest outcome). Lozano urged members to consult a financial professional and to begin saving early to take advantage of compounding.
The presenter also described the tax advantages of pretax contributions and the option to roll distributions into IRAs or qualified plans to avoid early-withdrawal penalties.
