Teacher Pension Incentives, Retirement Behavior, and Potential for Reform in Arkansas

Robert M. Costrell () and Josh B. McGee ()
Additional contact information
Robert M. Costrell: Department of Education Reform, University of Arkansas
Josh B. McGee: Department of Education Reform, University of Arkansas

Education Finance and Policy, 2010, vol. 5, issue 4, 492-518

Abstract: The authors analyze the Arkansas teacher pension plan and empirically gauge the behavioral response to incentives embedded in that plan and to possible reforms. The pattern of pension wealth accrual creates sharp incentives to work until eligible for early or normal retirement, often in one's early fifties, and to separate shortly thereafter. We estimate the effect of pension wealth accrual on teacher separation decisions using a new longitudinal data set of Arkansas teachers and find a significant impact. We then simulate the response to eliminating early retirement and raising the service requirement for normal retirement. We also simulate a shift to a constant accrual retirement plan. The response to both reforms is complex, as some would leave earlier and others stay longer. A constant accrual plan smoothes the pattern of retirement behavior as individuals tailor decisions to their own preferences instead of those built into the pension formula. © 2010 American Education Finance Association

Keywords: teacher retirement benefits; teacher pension plans; pension reform (search for similar items in EconPapers)
JEL-codes: I21 I22 J26 (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/EDFP_a_00013 (application/pdf)
Access to PDF is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:edfpol:v:5:y:2010:i:4:p:492-518

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=1557-3060

Access Statistics for this article

Education Finance and Policy is currently edited by Stephanie Riegg Cellini and Randall Reback

More articles in Education Finance and Policy from MIT Press
Bibliographic data for series maintained by The MIT Press ().