We often write about statistics or theoretical arguments about teacher pensions. But pensions aren’t just some technical policy that exists in a vacuum—they affect the lives of millions of teachers. We’ll be doing an occasional series chronicling those stories and how pensions affect individual teachers and former teachers.
Before working for Bellwether, I worked as a teacher in Maryland. I wanted to make a difference for students, especially those who were socioeconomically disadvantaged. Pay and benefits were of course necessary for a comfortable living but were, overall, only a peripheral concern.
During our new teacher induction, I signed multiple forms including a contract stating that I would contribute to the Maryland State Retirement System. I saw that 5 percent (later increased to 7 percent) was deducted from each of my paychecks to the state. I presumed that these contributions would go toward a safe nest egg that I could later claim and possibly even get for the rest of my life, or at the very least, that my contributions would be mine to take wherever, just like my 403b savings from prior work. (Only later did I learn that pensions are not portable, and purchasing service credit is expensive and impractical in most cases.) I had a vague understanding that the state would take care of my contributions, so I didn’t need to worry about choosing what portfolio investment blend I wanted. Other than that, however, I wasn’t concerned with my retirement benefits and assumed that the state had my best interest in mind. There were so many other teaching responsibilities that I needed to take care of for my students and school.
Now, I know how the odds are stacked against most teachers. In Maryland, the state pension plan assumes that over half of new teachers (57 percent) will not remain long enough to qualify for a minimal pension. Like many other states facing budgetary pressures, the Maryland legislature increased the required number of years to qualify for a pension, making it even harder for teachers to receive basic retirement benefits. Maryland teachers who leave before meeting service requirements can withdraw their contributions plus a generous 7 percent interest, but do not receive any portion of the state’s contributions which currently are around 13 percent of payroll. Very few states allow teachers to withdraw any portion of their employer contributions before vesting, and teachers in certain states receive less than their own contributions. I was fortunate to get at least my contributions back plus interest, but can’t claim any portion of the $20,000 plus in employer contributions made over three years on my behalf.
I also know that, even for those who do meet service year requirements, teachers are severely shortchanged. A teacher who stays for 10, or even 20 years, may not come out ahead. According to a recent Urban Institute report, a teacher in the median state needs to teach a minimum of 24 years in the same state retirement system in order to simply break even on their own contributions. Many teachers contribute toward the system, while few actually make any net gain.
Teachers nearing retirement understand the weight and importance of a hard-earned pension. But retirement security is unfortunately a peripheral issue unless you are closely approaching it. Pension plan reports, while publicly available, are esoteric, and few early and mid-career teachers have the time to carefully examine and project their benefits over time to see the penalties. Moreover, most teachers will make personal life decisions—move to another state or switch to another sector—in spite of their pension. Rather than continuing systems that disadvantage the majority of teachers, states should consider plans that can provide secure and flexible retirement benefits for all teachers.