Peaks, Cliffs, and Valleys: The Peculiar Incentives in Teacher Retirement Systems and Their Consequences for School Staffing

Robert M. Costrell () and Michael Podgursky
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Robert M. Costrell: Department of Education Reform, University of Arkansas

Education Finance and Policy, 2009, vol. 4, issue 2, 175-211

Abstract: This article examines the pattern of incentives for work versus retirement in six state teacher pension systems. We do this by examining the annual accrual of pension wealth from an additional year of work over a teacher's career. Accrual of wealth is highly nonlinear and heavily loaded at arbitrary years that would normally be considered mid-career. One typical pattern exhibits low accrual in early years, accelerating in the mid- to late fifties, followed by dramatic decline or even negative returns in years that are relatively young for retirement. Key factors in the defined benefit formulas that drive such patterns are identified along with likely consequences for employee behavior. The authors examine efficiency and equity consequences of these systems as well as options for reform. © 2009 American Education Finance Association

Keywords: teacher retirement; teacher pension systems; school staffing (search for similar items in EconPapers)
JEL-codes: I21 I22 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (45)

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