CalSavers Retirement Savings Program
CalSavers is a state-run low cost retirement savings program that you can join if you are a California-based worker and your employer does not provide its own retirement savings plan, or if you work for yourself or in another capacity.
As a CalSaver, you will contribute to a Roth IRA (Individual Retirement Account) that belongs to you. You can make an automatic payroll contribution or a recurring bank deposit to the account according to your own terms, and you can either let the program manage your investments or you can have a hand in the account.
Every California employer with five or more employees is required to offer CalSavers if they don’t already provide a retirement plan. Make sure to check with your employer before you enroll — you’ll need your company’s CalSavers info. If they don’t offer it, you can sign yourself up as an individual.
Free Resource: Retirement Specialist
Determining the best approach to your CalSavers Roth IRA is a personal choice. You can meet with a free specialist virtually to determine the best approach. A specialist can help you sort through all your options and plan the amounts, schedule and strategy for your retirement plan. This service is truly free, now and in the future — it’s a benefit provided by United Way.
CalSavers Program: Planning for Retirement
If you don’t get retirement benefits through your work, you can still plan for retirement. Many people are familiar with 401(k) plans, but this is not the only type of retirement savings program available to you. The CalSavers retirement program offers you a manageable Roth IRA that allows you to plan for the future on your own.
Planning for retirement is valuable at any age, and the earlier you save the more you earn. The CalSavers program is an easy way to put manageable amounts away for later. If the standard savings options feel like too much for you, you can choose to save at a lower rate. The sooner you start saving, even if it is just a little bit, the more your money can potentially grow.
How does the CalSavers Program Work
Contributing to your plan
You have two options for determining your rate of contribution.
The default rate
If you don’t choose your own rate, the standard savings rate for your CalSavers account is 5% of your gross pay, which is deducted from your paycheck on an after-tax basis.
The program will automatically increase your contribution (from your paycheck or deductions) by 1% each year until your savings rate reaches 8%, unless you choose otherwise.
The right-for-you rate
If you find that another contribution rate works better for your savings goals, you can adjust your rate at any time to as little as 1% or as much as you want, within IRS limits.
How your savings and investment works
If you work for a participating employer, a portion of your paycheck is automatically contributed to a Roth IRA that belongs to you. If you don’t work for a participating employer, you can set up recurring contributions to be deducted from your bank account.
Then, you can sit back and let the standard investment options kick in (the program will make intelligent investment decisions) or if you want to be more involved in your investments you can set your own contribution rate and investments.
Do Nothing. If you choose not to take action on your account, you will start saving automatically after 30 days with the standard savings and investments:
- 5% of your gross income (wages before taxes and other deductions) or your recurring contribution from your bank account.
- The first $1,000 of contributions will be invested into the CalSavers Money Market Fund and any subsequent contributions will be invested in a Target Retirement Fund that automatically resets the mix of stocks and bonds based on your age.
Customize It. You can customize your investment options and choices yourself. Here are some of the things you can do.
- Change your contribution rate
- Change your investment choices
- Change your account setting
- Make a withdrawal
- Designate beneficiaries (who will inherit your Roth IRA in the event of your passing)
CalSavers offers a range of investment options, from aggressive investments seeking higher returns to conservative investment options that seek to protect the money that you have put into your account (your principal). When you invest in CalSavers, you get access to high quality mutual funds and other investment options (the values will vary with market conditions).
Unless you select another option, your first $1,000 in contributions will be invested in the CalSavers Money Market Fund and subsequent contributions will be invested in a target retirement date fund based on your age. You can decide at any time whether to keep your investment in this fund or choose from a simple menu of other investment options.
What’s the Best Plan for Me
Overall, you’ll want to consider how much you can contribute now and where you feel you need to be years down the line. It’s important to look at the true amounts that you could earn if you change the contribution even just a little bit.
You’ll always want to consider if you are interested in managing the investment choices yourself or if you’d like CalSavers to do it for you. You can always change in time as you get more comfortable with investing, and you can always choose the default amounts and options. Essentially, you can customize your plan or you can keep it very simple. Just remember, even a few tweaks could significantly change what your future account could look like.
These are importants questions that you may want to review with a retirement specialist. The service is always free.
Do I Qualify?
Through CalSavers, you can contribute to your Roth IRA with a maximum contribution limit of $6,000 per year. If you’re age 50 or over, you can contribute another $1,000, for a total annual contribution of $7,000.
To determine how much money you specifically can contribute, you’ll first need to figure out your Modified Adjusted Gross Income (MAGI). Once you’ve determined your MAGI, you will be able to determine the maximum amount you can put into the account. You can learn more here.
How do I Apply?
Before You Get Started – Consultation
Before you fill out an enrollment form it’s good to have a conversation with a specialist. There is a lot of info to take in! To get in touch with one of United Way’s retirement specialists, visit the site, enter your contact info, and you can get into the important details.
Apply: My employer is registered with CalSavers
If your employer is registered for the program they will give you an access code to use when you sign up.
Apply: I’m not an employee of a registered company
You can sign yourself up for an account if:
- You are employed in the state of California
- You are 18 or older
- You have a Social Security Number or an Individual Taxpayer Identification Number
You can then set up automatic contributions or make the initial minimum contribution and select your investment options. Talk to someone about your retirement and get started saving.