Deciding to leave teaching is never a simple choice. Whether you are making a career change, stepping away for personal reasons, or simply unsure about what comes next, one of the biggest questions on your mind is probably: what happens to your CalSTRS account?
The good news is that leaving your teaching position does not automatically mean losing everything you have built. But the decisions you make after leaving can have a lasting impact on your retirement benefit. This guide walks you through exactly what happens to your CalSTRS account when you leave, what your options are, and how to protect the retirement income you have already earned.
If you want personalized guidance on your situation, the team at PEAK Solutions Financial specializes in helping California educators navigate decisions like these.
What Is the CalSTRS Defined Benefit Program?
Before diving into what happens when you leave, it helps to understand the foundation of your CalSTRS account.
CalSTRS, the California State Teachers’ Retirement System, is a defined benefit program. That means your retirement benefit is calculated using a specific formula, not based on how much money is in an investment account. The formula takes into account:
- Your age at retirement
- Your years of service credit (also called credited service)
- Your final compensation (typically your highest average annual creditable compensation)
This is different from a 401(k) or similar plan where you own a balance. With CalSTRS, you earn a right to a future monthly income. Your member contributions and employer contributions are pooled into the system and managed collectively.
Understanding this distinction is key because it shapes everything about what happens when you stop teaching.
What Happens to Your Service Credit When You Leave Teaching?
Does Your Service Credit Disappear?
No. Your creditable service does not disappear when you leave teaching. The year of service credit you have accumulated remains on record with CalSTRS. You do not lose the service credit you have already earned simply by leaving your position.
However, whether that service credit eventually translates into a retirement benefit depends on whether you are vested and what you choose to do with your account after leaving.
What Is Vesting in CalSTRS?
Vesting means you have earned the right to receive a future retirement benefit based on your service. In the CalSTRS Defined Benefit program, you become vested once you have earned at least five years of service credit with CalSTRS covered employment.
If you have fewer than five years of creditable service when you leave, you are not yet vested. You can still keep your account open or request a refund of your member contributions, but you would not be eligible for a monthly retirement benefit.
If you have five or more years of service credit, you are vested and have the right to a future retirement benefit, even if you never return to CalSTRS covered employment.
What Are Your Options When You Leave Teaching?
When you leave a CalSTRS covered position, you generally have two primary paths. Each has its own implications.
Option 1: Can You Leave Your Contributions in the System?
Yes. If you are vested, leaving your contributions in the CalSTRS system is often the wisest long-term choice. Here is what that means:
- Your service credit stays on record
- Your defined benefit remains intact for when you reach retirement age and decide to retire
- Your Defined Benefit Supplement account continues to earn interest
- You can still retire and collect your monthly retirement benefit once you meet the age and service requirements
- Any unused sick leave you had at your employer may still be factored into your credited service if it was reported to CalSTRS
This option preserves the retirement benefit you have earned. It is especially important if you have a significant number of years toward full retirement eligibility, or if you are considering returning to CalSTRS covered employment at some point in the future.
Leaving your funds in the system also means you may still qualify for concurrent retirement if you are a member of another public retirement system.
Option 2: Can You Request a Refund of Your Contributions?
Yes, but you should think carefully before doing so.
If you leave teaching, you have the option to request a refund of your member contributions plus applicable interest. However, requesting a refund has serious consequences:
- You forfeit all your service credit and creditable service history
- You lose your eligibility for a future retirement benefit under the defined benefit program
- You lose eligibility for disability benefits and survivor benefits
- If you return to CalSTRS covered employment later, you would need to requalify and may need to purchase service credit to restore what you gave up
A refund might make sense if you have very few years of service and are certain you will not return to teaching. But for most educators, this is a decision worth carefully weighing with a financial advisor before submitting a request to CalSTRS.
What Happens to Your Defined Benefit Supplement Account?
Your Defined Benefit Supplement account is a separate account within CalSTRS that holds additional contributions. It is funded by a portion of your creditable compensation and grows with interest.
When you leave teaching, this account does not automatically close. Your options for the Defined Benefit Supplement account include:
- Leaving the funds in the account, where they continue to earn interest
- Withdrawing the funds at a future date (subject to rules and potential tax consequences)
- Receiving the funds as part of your overall retirement payout when you retire
If you request a full refund of your CalSTRS account, your Defined Benefit Supplement account funds are also typically included in that withdrawal.
How Does Leaving Teaching Affect Your Final Retirement Benefit?
Does Leaving Early Reduce Your Retirement Benefit?
Leaving teaching before reaching full retirement eligibility will affect your retirement benefit, but it does not eliminate it if you remain vested. Your benefit will be calculated based on:
- The service credit you earned while employed in CalSTRS covered positions
- Your final compensation at the time you were last employed in a CalSTRS covered position
- Your age when you eventually retire
- Whether any career factor or longevity bonus provisions apply to your situation
The fewer years of additional service credit you have, the lower your monthly benefit will be. Retiring later (at a higher age) generally results in a higher benefit. This is one reason some educators who leave teaching still choose to remain in the system and collect benefits later in life.
Can You Purchase Service Credit After Leaving?
In some cases, yes. CalSTRS members may be able to purchase service credit for certain periods of service that were not previously credited. This can include things like prior teaching service performed outside the CalSTRS retirement system, military service, or time covered by a collective bargaining agreement that allowed for additional service credit purchases.
If you are considering this option, you should contact CalSTRS directly or consult the CalSTRS website for the specific rules around eligible periods and costs.
What If You Work for Another Employer or Retire from Another System?
What Happens If You Move to a Non-CalSTRS Job?
If you leave teaching and move into a position that is not CalSTRS covered, you are no longer making member contributions to CalSTRS and your employer is no longer making employer contributions on your behalf. Your service credit stops accumulating for that period.
However, as discussed, your previously earned service credit remains unless you choose to take a refund. You can still collect your CalSTRS benefit when you reach retirement age, based on the service you earned while in CalSTRS covered employment.
What About Social Security?
California educators who have been in CalSTRS covered employment are typically not covered by Social Security for that work. However, if you take a job outside of teaching in the private sector or another non-covered position, you may begin earning Social Security credits through the Social Security Administration.
If you end up with both CalSTRS benefits and Social Security benefits, there are federal rules such as the Windfall Elimination Provision and Government Pension Offset that could affect your total benefits. This is an area where professional guidance is especially valuable.
Can You Have Concurrent Retirement with Another System?
If you become a member of another public retirement system (such as CalPERS) while still being eligible for CalSTRS benefits, you may qualify for concurrent retirement, which allows you to retire from both systems at the same time. Eligibility rules apply, so it is important to understand the requirements of both systems before making any decisions.
What Should CalSTRS Members Do Before Leaving Teaching?
Whether you are leaving teaching temporarily or permanently, there are steps you should take to protect your retirement.
- Review your CalSTRS account to confirm how many years of service credit you have accumulated
- Determine whether you are vested (five or more years of credited service)
- Understand your final compensation and how it affects your projected benefit
- Do not request a refund impulsively without fully understanding what you are giving up
- Contact CalSTRS with specific questions about your account before making any decisions
- Seek personalized advice from a financial professional who understands CalSTRS and educator retirement planning
The team at PEAK Solutions Financial works specifically with California educators to help them understand their CalSTRS benefits, close income gaps, and build retirement plans that reflect their real goals. If you are unsure what leaving teaching means for your retirement, reaching out for a consultation is a smart next step.
You can also explore these related resources on the PEAK Solutions Financial website:
- Home – PEAK Solutions Financial
- About Us
- Our Services for California Educators
- Meet Our Agents
- Retirement Planning Blog for Educators
- 5 Things You Don’t Know About Your CalSTRS Account
- Contact Us for a Free Consultation
Works Cited
California State Teachers’ Retirement System (CalSTRS). Member Handbook: Defined Benefit Program. CalSTRS, 2024.
Social Security Administration. Government Pension Offset. SSA Publication No. 05-10007, 2024.
This article is for informational purposes only and does not constitute financial or legal advice. For personalized guidance on your CalSTRS retirement benefits, consult a qualified financial professional.
