- The Path to Retirement Security
- Defining Retirement Security
- Staying on the Road to Retirement Security
- Backloading: Pensions are Designed for Teachers Who Spend Their Entire Career in a Single State
- Most Teachers Will Not Earn a Full Pension
- Pensions Don’t Transfer Across State Lines
- People Do Not Always Earn As Large of Pensions as They Think
- Some States Have Minimized These Challenges
Some States Have Minimized These Challenges
Some states have found ways to adjust the typical guaranteed income pension design to make them better serve more teachers and other public workers.
Colorado: Every state is required to give you back your own contributions into a pension fund if you decide to leave to teach in another state, take a job a private school, or leave the teaching profession. Some states even do this with interest. But on the whole when this happens you give up all of the employer contributions made on your behalf, meaning you lose a lot of the potential retirement income you’d been earning. However, Colorado will not only give you back your own money with interest but will also provide a 50% match on this money, effectively giving you a (potentially large) portion of the employer contributions. This doesn’t fully solve the problem of backloaded benefits, but it does mean pension benefits in Colorado provide more retirement income savings than the typical guaranteed income plan in the country.
South Dakota: Where most states require five years of vesting or more, South Dakota only requires two years. This means more educators will qualify to receive some benefit, even if they don’t work a full career.
Wisconsin: Most teachers do not work long enough to earn a pension that is large enough on its own to retire comfortably. They either supplement with personal savings, a partner’s retirement plan, or reduce their expenses in retirement. However, in Wisconsin the state has decided to share strong investment returns with retirees. Every retiree starts with a minimum pension, based on their years of service. But when investment returns are strong, the pension board incrementally increases the value of the pension. Overtime, the value of the pension can grow even faster than inflation. In practice this system can also be used to reduce pensions if there are massive investment losses, but that is rare and the amount can never go below the minimum level earned during an educator’s career.