Teacher Pensions Blog

Today, roughly half of Michigan’s new young teachers will leave the classroom after five years. That may sound low, but Michigan’s retention rates are actually higher than they used to be. Fifteen years ago, even fewer teachers stayed in the classroom than they do today. The following chart shows the retention data calculated based upon the state pension plan’s assumptions for 25-year-old female teachers in Michigan.

Looking vertically within a given cohort, retention decreases over a time. Of the cohort of 25-year-old females that began in 1998, for example, the pension plan estimated 39 percent would remain after five years and only 20 percent would remain after 30 years of teaching.

Looking across the decade, however, there is an increase in the overall expected retention rates. In 1998, Michigan’s pension plan assumed only 39 percent of teachers would remain after five years. A steady trend toward higher retention continued in subsequent years, and the state now assumes that 52 percent of 25-year-old female teachers will stay five years. The change represents an increase of about 34 percent more teachers staying in the classroom at least five years.

Rising teacher retention rates is a good thing for the individual teachers as well as for their students, schools, and districts. In terms of pensions, though, rising retention rates mean higher costs. Coinciding with the increase in teacher retention, Michigan’s underfunded liability quadrupled over the past decade from $6 billion to $24 billion. More teachers staying in the systems meant higher costs for the system; the state estimated an actuarial loss of over $21 million from a decrease in withdrawals (from resignations and death) in 2009 alone.

Having half of your teachers leave the classroom within five years is nothing to boast about. But it is an improvement from past years. Michigan should continue to encourage teacher retention, and in doing so, should consider the consequences for schools, teachers, and the retirement system.