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

Author

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  • Robert M. Costrell

    (Department of Education Reform, University of Arkansas)

  • Michael Podgursky

    (Department of Economics, University of Missouri, Columbia)

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

Suggested Citation

  • Robert M. Costrell & Michael Podgursky, 2009. "Peaks, Cliffs, and Valleys: The Peculiar Incentives in Teacher Retirement Systems and Their Consequences for School Staffing," Education Finance and Policy, MIT Press, vol. 4(2), pages 175-211, April.
    • Handle: RePEc:tpr:edfpol:v:4:y:2009:i:2:p:175-211
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/edfp.2009.4.2.175
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    More about this item

    Keywords

    teacher retirement; teacher pension systems; school staffing;
    All these keywords.

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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