Next Wave Options
Independent life insurance and retirement income agency serving Salinas and Monterey County.
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Independent life insurance and retirement income agency serving Salinas and Monterey County.
Get a quote
Monterey County's largest employers are public: the County of Monterey, the cities, the school districts, Hartnell College, CSU Monterey Bay, and the state's correctional facilities in Soledad. Their employees retire with money in accounts that a generic 401(k) article does not describe: a defined-benefit pension from CalPERS or CalSTRS, a 457(b) deferred compensation account, or a 403(b) from a school district, often alongside an IRA from earlier private work. Each follows different rules about what can be rolled over, when money can be taken, and what happens at death. This page explains the three neutrally and links to the official sources for each.
Next Wave Options is not affiliated with CalPERS, CalSTRS, the County of Monterey, any city or any school district. We explain options and link to the official plan documents; we never suggest leaving a public plan.
A defined-benefit pension pays a monthly amount for life calculated from your years of service, your age at retirement and your compensation, under a formula set by the system and your membership date. County, city, prison and CSU staff are generally in CalPERS; certificated school employees are in CalSTRS. Two things about a pension matter for everything else on this site. First, it generally cannot be rolled over; it is a promise of monthly income under the system's rules, not an account balance you can move. Second, at retirement you choose among payment options that trade a higher benefit for you against a continuing benefit for a survivor, and the election is usually permanent. Our CalPERS and CalSTRS pages go into each system; the systems' own documents are the authority.
County and city employees can contribute to a governmental 457(b) plan, such as the Monterey County Deferred Compensation Plan, from their own pay, pre-tax or, where the plan offers it, Roth. Unlike the pension, this is an account balance you control, and when you leave service it has options: leave it, take payments from it, transfer it to another governmental 457(b), or roll it into an IRA or another plan. Its distinctive feature is that money which originated in a governmental 457(b) is generally not subject to the additional 10 percent tax on early distributions at any age, and that a rollover into an IRA gives that up. The IRS describes the plan type on its 457(b) page; our County of Monterey 457(b) and 457(b) rollover options pages explain the choices.
School district employees can contribute to a 403(b) through vendors their district has approved, and CalSTRS offers its own program, Pension2. The 403(b) follows rules close to a 401(k)'s, with one trap: many accounts are annuity contracts with their own surrender charges, which a rollover can trigger even though the IRS does not tax it. Every vendor approved for California school employees must list its products and fees on 403bCompare, which is the first place to check any 403(b) product. The IRS describes the plan type on its 403(b) page; our district 403(b) vendors and 403(b) rollover options pages explain how to read a vendor list and what happens when you leave.
| Money | Can it be rolled over? | What to know |
|---|---|---|
| CalPERS or CalSTRS pension benefit | Generally no | Paid monthly for life under the system's rules; survivor options chosen at retirement |
| A refund of your own pension contributions if you leave before retiring | Usually yes, to an IRA or plan | Taking a refund generally forfeits the pension benefit; the system's documents explain the consequences |
| Governmental 457(b) | Yes, to an IRA or eligible plan | Rolling to an IRA gives up penalty-free access before 59½; direct rollover avoids withholding |
| 403(b) | Yes, to an IRA or eligible plan | Check the contract's surrender charges first; direct rollover avoids withholding |
| An IRA from earlier private work | Yes, between IRAs or into a plan that accepts it | Ask for a trustee-to-trustee transfer; the once-per-12-months rule governs 60-day rollovers |
A qualified rollover is tax-deferred, not tax-free: no tax is due at the rollover when it is done correctly, and income tax is due when the money is withdrawn. The IRS rollovers page is the source; your situation belongs with a tax professional.
Some public employees in California, including most CalSTRS members, do not pay into Social Security through their public job, and federal rules govern how a public pension interacts with any Social Security benefit earned from other work or from a spouse. Those rules are the Social Security Administration's to state, and they have to be checked against your own record before you plan around them; we will put whatever the SSA shows you into the income worksheet, and we will not guess at it.
The useful question is not "what do I do with my 457(b)?" in isolation; it is how the pension, Social Security if any, and the accounts you control together cover the bills that must be paid for life. That is the income planning worksheet. Where a gap remains after the pension and Social Security, part of a 457(b) or 403(b) might reasonably be assigned to a contract that pays for life, and that contract comes with surrender charges, withdrawal limits and, for indexed contracts, caps that must be on the page before anything else is. Most of the time the answer for a public employee with a good pension is that the accounts should stay flexible, and we will say so.
Generally no. A defined-benefit pension pays a monthly benefit for life under the system's rules; it is not an account balance. If you leave before retiring, a refund of your own contributions can usually be rolled over, but taking it generally forfeits the pension. The system's documents are the authority.
The pension is a promise of monthly income for life, calculated by formula, that you cannot move. The 457(b) is an account you contributed to and control, with rollover and distribution options when you leave service, and penalty-free access to its own money at any age.
Not by default. Money that originated in a governmental 457(b) is not subject to the additional 10 percent tax before 59½; rolled into an IRA it becomes subject to IRA rules. Leaving it in the plan or taking payments from it preserves that access. Compare fees and options before deciding.
Yes, when you leave the district, to an IRA or another plan that accepts it, as a direct rollover. Check the contract's surrender charge schedule first; many 403(b) accounts are annuity contracts that charge on the way out.
No. We are an independent insurance agency, not affiliated with CalPERS, CalSTRS, the County of Monterey, any city or any school district. We explain options and link to their official documents, and we never suggest leaving a public plan.
It depends on whether your public job paid into Social Security and on what you earned elsewhere. Federal rules govern how a public pension and Social Security interact; the SSA's own statement for your record is the only reliable source, and we plan from that rather than from a rule of thumb.
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Schedule a CallReviewed by Roberto Morales, California Insurance License #0G97165. Next Wave Options is licensed for life and annuity products only and does not provide investment, tax or legal advice.
