Understanding CalSavers: What California’s State Retirement Program Means for You

If you work in California and don’t have access to a retirement plan through your employer, you may have heard of CalSavers. It’s the state’s retirement savings program designed to help more workers begin saving for the future.

Whether you’re an employee automatically enrolled in CalSavers or a business owner trying to understand your responsibilities, it’s helpful to know how the program works—and what choices you may have beyond it.

What Is CalSavers?

CalSavers is a state-sponsored retirement savings program created for California employees whose employers do not offer a qualified retirement plan. The program uses a Roth IRA structure and is funded through payroll deductions.

Key features include:

• Automatic enrollment for eligible employees
• Contributions made after tax
• Individual ownership of the account (it stays with you if you change jobs)
• No employer contributions required

The goal of CalSavers is simple: make retirement saving easier for workers who might not otherwise have access to a plan.

Who Is Required to Participate?

CalSavers primarily affects employers, not employees. California law requires businesses that:

• Have five or more employees, and
• Do not offer a retirement plan

to either:

1. Register for CalSavers, or
2. Offer an alternative qualified retirement plan (such as a 401(k), SEP IRA, or SIMPLE IRA).

Employees are automatically enrolled once their employer registers, but participation is ultimately optional for the individual.

How CalSavers Works for Employees

If you’re an employee enrolled in CalSavers, here’s what typically happens:

• You’re automatically enrolled at a default contribution rate (currently 5% of pay).
• Contributions increase gradually over time unless you opt out.
• Funds are invested in a target-date style portfolio based on your age.
• You can change your contribution rate or opt out entirely at any time.

Because contributions go into a Roth IRA, withdrawals in retirement may be tax-free if certain conditions are met.

What Business Owners Should Know

For employers, CalSavers is designed to be simple:

• No employer contributions
• No fiduciary responsibility for investment selection
• No plan administration or testing requirements

That said, many business owners eventually find that offering a custom retirement plan provides greater flexibility and value—both for themselves and their employees. At Fischer Investment Strategies, we can assist business owners in designing optimized retirement plans that can significantly reduce taxes and defer income for future retirement needs.

Some alternatives business owners may explore include:

• 401(k) plans
• SIMPLE IRAs
• SEP IRAs

Each option has different cost, contribution, and administrative considerations.

CalSavers vs. Employer-Sponsored Plans

While CalSavers is a helpful starting point, it may not be the best long-term solution for everyone.

Here are a few differences to consider:

• Contribution limits: Employer-sponsored plans often allow for higher savings limits.
• Employer contributions: Some plans allow matching or profit-sharing.
• Investment flexibility: Custom plans typically offer more investment choices.
• Tax planning opportunities: Traditional and Roth options may be available.

For business owners, the decision often comes down to balancing simplicity, tax efficiency, and long-term goals.

Why Understanding Your Options Matters

CalSavers plays an important role in expanding access to retirement savings across California. For many workers, it’s a meaningful first step toward building long-term financial security.

At the same time, both employees and business owners benefit from understanding the broader landscape of retirement planning options—especially as income, business size, or savings goals evolve.

Guidance From a Local, Fee-Only Fiduciary Advisor

At Fischer Investment Strategies, our Westlake Village–based, fee-only fiduciary team regularly works with individuals and business owners across California who have questions about CalSavers and other retirement planning options.

We help clients:

• Understand how CalSavers fits into their overall financial picture
• Evaluate alternative retirement plans when appropriate
• Coordinate retirement savings with broader tax and investment strategies

Whether you’re just getting started or considering your next step, having clarity around your options can make retirement planning feel far more manageable.