If you work for the state of Colorado, a school district, a university, or a local government, you probably have PERA. The Public Employees' Retirement Association of Colorado. It is a defined benefit plan, which means you get a guaranteed monthly check in retirement based on a formula. That sounds great. And in many ways, it is. But it is not enough on its own. Not even close.
I have worked with dozens of teachers, state workers, and university staff over the years. And the most common misconception I hear is this: "I have PERA, so I do not need to save extra." I hear it from twenty-five-year-olds. I hear it from fifty-five-year-olds. And every time, I have to gently explain that PERA was never designed to be your entire retirement income. It was designed to be a base. A foundation. Not the whole house.
Here is how PERA works. Your benefit is calculated using three numbers. Your highest average salary, usually your last three to five years. Your years of service. And a multiplier, which is currently 2.5% for most members. So if you worked 30 years and your highest average salary was $60,000, your annual benefit is 30 times 2.5% times $60,000. That equals $45,000 a year, or $3,750 a month.
That sounds decent. But let us look closer. $3,750 a month is $45,000 a year. The median household income in Denver is $85,853. So your PERA benefit replaces about 52% of your pre-retirement income. Financial planners generally recommend replacing 70% to 80% to maintain your lifestyle. That is a gap of $18,000 to $27,000 a year. Where does that come from?
Social Security might help, but many PERA members do not pay into Social Security. Teachers and some state workers are exempt. If you do not have Social Security, the gap is even bigger. If you do have it, the average benefit is about $1,800 a month. Combined with PERA, that gets you closer. But still not all the way.
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This is why supplemental savings are essential. A 403b for teachers. A 457 for state workers. An IRA for anyone. These accounts let you save pre-tax money that grows over time. And if your employer offers a match, that is free money. I do not care what your budget looks like. You find a way to get the full match.
Let me use a real example. Sarah is a teacher in Denver Public Schools. She is forty-five. She has twenty years in PERA. Her current salary is $58,000. If she works until sixty-five, her PERA benefit will be roughly $38,000 a year. She also has Social Security, which will be about $1,400 a month or $16,800 a year. Combined, that is $54,800. Her current take-home pay is about $3,600 a month or $43,200 a year. Wait. That is actually more than her current income. What is the problem?
The problem is taxes. PERA benefits are taxable. Social Security might be partially taxable. And Sarah's expenses will not drop as much as she thinks in retirement. She will still have a mortgage for the first ten years. She will still need healthcare, which gets more expensive as you age. She will still want to travel, visit grandkids, and enjoy life. The $54,800 sounds fine on paper. In reality, it is tight.
Now let us add a 403b. If Sarah contributes $500 a month from age forty-five to sixty-five, and earns 7% annually, she will have about $260,000. Using the 4% withdrawal rule, that adds $10,400 a year. Now her total retirement income is $65,200. Much better. Much more comfortable.
The retirement savings calculator on our site can run this exact scenario. Input your age, current PERA years, salary, and supplemental savings. It projects your total retirement income and shows you the gap. It is sobering. But it is also motivating.
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The savings goal calculator helps you figure out how much to save monthly to close that gap. If you need an extra $200,000 by retirement, and you have fifteen years, that is about $775 a month at 7% returns. Too much? Extend the timeline or adjust the goal. But know the number.
And the monthly budget calculator helps you find room for those contributions. Even $100 a month makes a difference over twenty years. That is $24,000 in contributions, which grows to about $52,000 at 7%. Not life-changing, but not nothing either.
I also want to address the PERA changes that have happened recently. The retirement age has increased for newer members. The cost-of-living adjustments have been modified. The contribution rates have shifted. If you have not looked at your PERA statement in the past year, do it now. Log in. Check your projected benefit. Understand your options. Knowledge is power, especially when it comes to retirement.
One more thing. PERA offers a voluntary investment program called PERAPlus. It is essentially a 401k for PERA members. If your employer does not offer a 403b or 457, PERAPlus is your supplemental savings vehicle. The fees are reasonable. The investment options are decent. And it integrates with your PERA account. Look into it.
Colorado state employees have a good foundation with PERA. But a foundation is not a house. Build the walls. Add the roof. Create a retirement that is actually comfortable, not just survivable. Your future self will thank you. And so will your kids, who do not want to support you in your seventies because you did not save enough.
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FAQs
Is PERA enough for retirement?
Usually not on its own. PERA typically replaces 50-60% of pre-retirement income. Most retirees need supplemental savings through a 403b, 457, or IRA.
How is my PERA benefit calculated?
Years of service times 2.5% multiplier times your highest average salary. For example, 30 years at $60,000 equals $45,000 annually.
Do PERA members get Social Security?
Some do, some do not. Many teachers and state workers are exempt from Social Security. Check your specific employment category.
What is PERAPlus?
PERA's voluntary investment program, similar to a 401k. It allows PERA members to save additional money for retirement with reasonable fees.
How much should PERA members save additionally?
Aim for at least 10-15% of income in supplemental accounts. If starting late, increase to 20-25% to close the gap.
Table: PERA Retirement Income Projection
| Source | Monthly Amount | Annual Amount |
|--------|---------------|---------------|
| PERA (30 years, $60K salary) | $3,750 | $45,000 |
| Social Security (if eligible) | $1,400 | $16,800 |
| 403b ($500/month, 20 years) | $870 | $10,440 |
| Total with supplemental | $6,020 | $72,240 |
| Total without supplemental | $5,150 | $61,800 |
