This is a corrected version of the blog. The previous edition incorrectly stated SBMA recipients won’t receive notification before first payment and mischaracterized the annual 2% benefit adjustment members receive.

Pension Sense blog | June 23, 2026 | Melissa Jones-Ferguson

Things keep getting more expensive. Groceries, gas, eating out—for adulting types, the struggle is real.

But for retirees on a fixed income, preparing for changes to the cost of living and inflation can be tricky.

Purchasing power is a measurement of how your retirement benefit keeps pace with inflation. If your benefit stays the same but prices double, your purchasing power is 50% of its original value.

To help protect your purchasing power, your CalSTRS retirement benefit payment has two built-in protections against inflation.

Annual benefit adjustment

You may hear terms like “COLA” or “improvement factor” when discussing retirement benefit increases. For CalSTRS members, these terms refer to the annual benefit adjustment, a 2% increase of your original benefit amount, which is then added to your pension payments annually.

This non-compounded adjustment is not tied to changes in the cost of living. Rather, it is added automatically to your benefit every year, beginning September 1 after the one-year anniversary of your retirement.

Note that your retirement date must be before September 1 to receive the annual benefit adjustment on September 1 for the following year.

For example, if you retired in July 2025, you will reach your one-year anniversary in July 2026, and your first annual benefit adjustment will appear on your October 1, 2026, payment.

Under the CalSTRS Funding Plan, the Legislature cannot reduce the 2% annual benefit adjustment for members who retire on or after January 1, 2014.

And while the annual benefit adjustment for members who retired before January 1, 2014, is not contractually guaranteed, the Legislature has never reduced it.

Purchasing power protection

Did you know that CalSTRS has one of the strongest anti-inflation programs operated by any public pension system in the country? It’s true.

This supplemental program is separate from the annual benefit adjustment and is the mechanism CalSTRS uses to help offset inflation if your retirement benefit’s purchasing power falls below 85% of its original value.

If inflation causes a benefit’s purchasing power to drop below 85% of your initial pension payment, CalSTRS will begin providing supplemental benefit payments to retired members and beneficiaries, subject to the availability of funds. Due to high inflation, the number of members who receive these payments has increased over the past few years.

If you are eligible, you will receive a confirmation letter and supplemental benefits will be paid in quarterly installments on October 1, January 1, April 1 and July 1 to maintain purchasing power.

Your quarterly supplemental payment amount may be reduced during periods of low inflation or deflation. But your monthly benefit will never drop below your base allowance plus annual benefit adjustments.

Learn more about how purchasing power and SBMA payments are calculated in the Supplemental Payments: Funding Information and Estimation publication. This publication includes worksheets to help you calculate rough estimates of your supplemental payments.

Looking ahead

Things change. If you need to adjust your financial plans, remember you have built-in protections against inflation.

If you’re thinking about working after retirement in periods of high inflation or otherwise, please see our Working After Retirement webpage.

Wherever your financial plans take you, CalSTRS has resources to help.

More information on your pension is available in your Member Handbook and these useful videos. You can also learn more by signing up for a CalSTRS webinar.