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Researchers Find that Experienced Teachers Reap the Benefits of Pension Spikes, then Retire |
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From EurekAlert! - Breaking News: Teacher shortages and requirements associated with the No Child Left Behind Act combine to make experienced teachers valuable assets. However, despite their high demand, an increasing number of seasoned educators are retiring. Economic researchers have found the structure of many teacher pension plans is the primary reason that many elect to retire. Likewise, the researchers said those plans have the effect of locking younger teachers, who may want to leave or are better suited for another job, into "putting in time" so as to receive a large spike in pension wealth. In their study, Robert M. Costrell, professor of education reform and economics at the University of Arkansas, and Michael Podgursky, professor of economics at the University of Missouri-Columbia, found that teacher pensions don't have a smooth, uniform trajectory of wealth accumulation. Rather, the plans are typified by sharp peaks and valleys caused by changes in the annual annuity payment (determined by a benefit formula) and the number of years a teacher can expect to collect it. Costrell and Podgursky said that arrangement entices teachers to stay on the job until they reap the benefits of sharp pension spikes and then pushes them to retire early -- often in their early to mid-50s. In Arkansas, one of the five states in their study, Costrell and Podgursky noticed that for a teacher who entered the profession at age 25, a particularly sharp spike occurs at age 50 -- when that teacher's pension wealth increases by almost five times his or her salary.
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