Are Texas Teacher Retirement Benefits Adequate?

Chad Aldeman and Anthony Randazzo
Publication Date: 
December 2020

Long-serving veterans who remain in the Teacher Retirement System of Texas for 27 or more years can earn enough retirement income to meet living expenses. But all other TRS members are likely to leave with inadequate savings. Even for those who have secured a pension, their benefits have not been consistently adjusted for inflation, leaving retirees with a steadily eroding benefit. 

Those are the key findings of our new paper on teacher retirement benefits in Texas, a state that has chosen not to provide most of its educators with Social Security coverage. The lack of Social Security coverage across its school districts makes it even more important for the state to provide all of its public-sector employees with adequate retirement benefits.

To address this problem, we recommend that Texas legislators open up a different type of defined benefit retirement plan for teachers and other education employees called a Guaranteed Return (GR) plan. GR plans are a kind of defined-benefit plan, similar to a pension, but a GR plan defines the benefit an employee receives as a guaranteed investment return on employee and employer contributions. There are a number of ways GR plans can be designed, but we model a plan where TRS employees receive a guaranteed 4% return every year, plus additional upside when investments grow faster.  

You can download and read the full report here. But to put the plans in context, consider the teacher profiles below. For each teacher, we describe their role within Texas public schools and consider how much they might have earned under a cost-neutral GR plan like the one described in the paper. Additionally, each profile features a quote from the teachers on their perspectives on retirement. 


Josue Tamarez is a 4th grade teacher. In his 10th year of teaching, Mr. Tamarez is already eligible to collect a pension when he retires. But he would need to work another 17 years for the pension to be worth enough to retire on, and even then it would be at risk of being eroded by inflation over time.

If Mr. Tamarez had participated in a GR Plan like the one modeled here, he could have had a retirement account balance worth nearly $160,000 by now.

Mr. Tamarez on retirement: “Retirement benefits didn't affect me staying in the classroom. Many young teachers like me, we are not thinking 30 years ahead. We're thinking, “Can I pay my mortgage today?’” 


Miriam Rodgers teaches US Government, Economics, and Theory of Knowledge to 11th and 12th graders. By the end of this year, her fifth year teaching in Texas, Ms. Rodgers will qualify for a pension. But she would need to remain teaching in Texas until at least the year 2032 in order for her TRS benefit to provide minimally comfortable retirement benefits. 

If Ms. Rodgers had participated in a GR Plan like the one modeled here, her retirement benefits would adequately match her years of service no matter how long she teaches.  

Ms. Rodgers on retirement: "I think an attractive pension or at least the myth of it is necessary to keep people from running for the hills. But I don't think it's bringing people into teaching. I’ve never met a teacher who's like, "I'm just going to work all this time for these sweet, sweet benefits." …When I hear politicians talking about lazy teachers just soaking up their sweet salary and benefits, it's totally ludicrous.” 


Celeste Graham teaches 10th grade world history. In her 5th year of teaching Ms. Graham will qualify for a pension at the end of the year. But she would need to keep working for two more decades to qualify for a pension worth enough to retire on, and even then the money paid out to her may be eroded by inflation over time.

If Ms. Graham had participated in a GR Plan like the one modeled here, she would have benefits proportional to her years of service by the end of this year. 

Ms. Graham on retirement: "I suspect that my life is going to expand beyond the borders of the state and the systems that it has. And I want to be in a position where I have transferable benefits from a system that's honored no matter where my life takes me.” 


Mark Rogers teaches 2nd grade. After 10 years of teaching, Mr. Rogers is already eligible to collect a pension when he retires. But he would need to work another 15 or 20 years in TRS for the pension to be worth enough to retire on, and even then it would be at risk of being eroded by inflation over time. 

If Mr. Rogers had participated in a GR Plan like the one modeled here, he could have qualified for an annuity worth approximately twice what his TRS benefits are currently worth.  

Mr. Rogers on retirement: "Will the pension keep me in the classroom past 25 years of service? Maybe. I think people value their time. And if I find something in 25 years that is really interesting for me, that is outside of the classroom, my pension is not going to make the decision for me…. If I still love what I'm doing, I'll stay. But it's not my retirement benefit that's going to make that choice.” 


As illustrated by the examples above, GR plans offer distinct advantages over traditional defined-benefit (DB) pension plans like the one currently operated by TRS.

First, under GR plans, workers earn benefits more steadily throughout their careers, rather than waiting to reach the age and service eligibility requirements of traditional defined benefit pension plans. This feature would ensure more Texas education employees earn adequate retirement benefits compared to the status quo.

Under the plan described above, we assume retirement contributions stay the same as they are under current law. Teachers, districts, and the state would not see their contributions change. Workers would have the same amount of money going toward their retirement, and the state would continue making the same payments toward the plan’s unfunded liabilities. 

When employees were ready to retire, they would have a choice between a guaranteed stream of payments through an annuity paid out in guaranteed monthly payments or a lump sum value of their account. If the state set the lifetime annuity as the default option — which we recommend — the GR plan would function just like the monthly benefit checks delivered through the current TRS structure. The state could offer employees the ability to select an annuity that’s right for them, including whether they want to build in protection for their survivors or whether they want their annuity payments to include cost-of-living adjustments (which TRS currently lacks).

Second, a GR plan would reduce the risk that the state will accrue additional unfunded liabilities going forward. As of this year, TRS has accumulated an unfunded liability of $50.6 billion, which eats into state and school district budgets, keeps teacher compensation low, and prevents retirees from receiving cost-of-living adjustments on their pensions. With the national economy in the midst of a recession in the wake of the COVID-19 pandemic, TRS’ unfunded liabilities are likely to rise even further in the coming years.

The shortfall at TRS is partially from the legislature’s failure to ensure it pays actuarially required contributions every year and partially because investments have not met the TRS board’s assumptions. In response, Texas legislators have opted to reduce costs by cutting benefits for new hires. TRS is currently operating three tiers of benefits based on the employee's hire date, and each tier offers less generous retirement benefits than the tier that came before it. These cuts harm the retirement savings of new workers and limit the ability of schools to recruit and retain high-quality teachers.

The state legislature has also gradually increased the contribution rate that all active teachers have to pay into TRS, even though benefits are not increasing. In 2019, the Texas legislature passed legislation that will phase in a series of increases to employee and employer contribution rates toward TRS. Those changes will help the plan’s finances, but they also mean that districts will have less discretionary money and workers will see reductions in their take-home pay. By 2024, members will have 8.25% of their pay taken out for TRS contributions.

While these changes will improve the long-term financial viability of the TRS plan, they do not alter the larger structural problems. Moreover, the changes have done nothing to prevent the plans from accruing additional unfunded liabilities going forward. TRS is still banking on lofty investment returns, and if its assumptions prove incorrect, as they have in the past, the state’s unfunded liabilities could continue to grow. 

Adding a GR plan will not reduce TRS’ current unfunded liability. The state is responsible for paying off its debts regardless of how future teachers earn benefits. However, over time, covering new workers in a GR plan would reduce the potential for adding new debt. 

Fortunately, Texas already has a model within its state borders: Texas county and municipal employees are already covered by GR plans and have been for decades. Read our full report for how Texas can adopt a similar model for education employees. All Texas teachers deserve adequate retirement benefits. The current TRS system isn’t meeting that goal, but a well-designed GR plan could.