California’s pension system is actually pretty simple. Employees who began before 2013 are covered by the 1939 County Employees Retirement Law, which guarantees pensions for public workers like firefighters, police officers, and administrative staff. The calculation comes down to three key inputs:
- Years of Service
- Final Compensation
- Benefit Factor (age-based)
Before we dive into the details of how pensions are calculated, let’s take a step back and talk about the 1939 County Act.
What Is the 1939 County Act?
The 1939 County Employees Retirement Law allowed counties in California to set up pension systems for their public employees. This was a game changer for local employees who needed financial security after retirement, especially since many are excluded from federal Social Security. The law laid the groundwork for pension plans that are still in place today, providing a steady income for workers who spent years serving their communities.
Now, let’s walk through the formula!
The Pension Formula
California pensions are calculated using this formula:
Years of Service × Benefit Factor × Final Compensation = Annual Pension
Sounds straightforward, right? Let’s break it down with some real-world examples of how this plays out for three different types of public employees: Jane, Mike, and Jim.
Jane the Administrative Assistant
Jane worked as an administrative assistant for the county for 30 years. Her final salary was $60,000, and she’s retiring at 55, which gives her a 2% benefit factor (a standard for many county employees retiring at this age) - also known as "2% at 55" for many miscellaneous members.
- Years of Service: 30 years
- Benefit Factor: 2%
- Final Compensation: $60,000
Now, plugging this into the formula:
30 years × 2% × $60,000 = $36,000 per year
Jane will receive $36,000 annually with cost-of-living-adjustments (COLA) for the rest of her retirement.
Mike the Firefighter
Mike has been fighting fires for 25 years and his final salary was $90,000. Due to the physical demands of the job, he's decided to retire earlier at 50, so his benefit factor is 3% based on the "3% at 50" safety formula.
- Years of Service: 25 years
- Benefit Factor: 3.0%
- Final Compensation: $90,000
Here’s Mike’s pension calculation:
25 years × 3.0% × $90,000 = $67,500 per year
Mike will receive $67,500 annually with cost-of-living-adjustments (COLA). Although he retired earlier, working as a first responder allowed him a higher ending proportion of his final salary.
Jim the Police Officer
Jim worked as a police officer for 20 years and is retiring at 55. His final salary was $100,000 and his benefit factor is 3.0%. He is receiving the "3.0% at 55" formula. Like firefighters, police officers can retire several years earlier due to the demanding nature of their jobs.
- Years of Service: 20 years
- Benefit Factor: 3.0%
- Final Compensation: $100,000
Let’s calculate Jim’s pension:
20 years × 3.0% × $100,000 = $60,000 per year
Jim will receive $60,000 annually with COLA.
Why the 1939 County Act Matters
The 1939 County Act paved the way for these types of pensions, giving public employees like Jane, Mike, and Jim a secure retirement based on their years of service. Without this law, many county workers wouldn’t have the same financial stability once they retire. You may have noticed -- none of those county workers ended up receiving 100% of their final income! Although the pensions are to help public employees in retirement, unfortunately they do not always cover 100% of necessary income.
Enhance Your Pension
Boosting your pension is all about using smart strategies to get the most from your retirement benefits. Factors like when you retire and your job type (miscellaneous, safety, or general) can make a big difference. Due to the formula, you can increase your pension in multiple ways:
- Wait to retire (increases age)
- Job classification (increases benefit factor)
- Work longer (increase years of service)
- Salary raises (increases final compensation)
While these options may not sound particularly appealing—after all, who wants to work longer or retire later?—our pension calculator can help you explore different scenarios to see how to make your pension benefits work for you.
Evaluate your retirement readiness
To truly understand and maximize your benefits, including options like holiday or vacation pay and sick leave cash-outs, visit Advanced Pension. Register for free today to access our pension calculator and take the first step toward securing a more comfortable retirement. With the right tools and information, you can plan effectively and ensure your retirement is as rewarding as possible.