January 2011

Pensions and K-12 Teacher Retirement: An Analysis Using National Teacher Data

The retirement security landscape has changed drastically for most workers over the last thirty years – except for public school teachers and other state and local government employees. Many private-sector employers have stopped offering traditional retirement plans, while most state and local employees remain covered by defined benefit (DB) pension plans. Research shows that DB plans have had strong effects on worker retention in the private sector, as workers delayed retirement until they cash in on large pension wealth accruals late in their careers and then retire abruptly. We explore these effects for teachers, using data that includes measures of teacher qualifications and job satisfaction. We find that dissatisfied teachers respond much more to pension incentives than satisfied teachers do, first delaying retirement while pension wealth is still accumulating and then retiring abruptly.