Peaks, Cliffs, and Valleys
The incentive structures of teacher pension systems can have powerful effects on the composition of our teaching force and on public finance. Teacher pension systems have two strong incentives—a pull and a push. Teachers typically earn relatively little in the way of pension benefits until they reach their early fifties, when much larger benefits start to accrue. The system therefore pulls teachers to “put in their time” until then, whether or not they are well suited to the profession. Beyond that point, the pension system quickly begins to punish teachers for staying on the job too long, pushing them out the door at a relatively young age, often in their mid-fifties, even if they are still effective teachers. This paper illustrates the powerful “pull-push” incentives in Ohio, Arkansas, Missouri, California, and Massachusetts and shows the patterns of pension wealth accumulation over teachers’ careers, patterns that feature dramatic peaks, cliffs, and valleys that can greatly distort work decisions for no compelling public policy purpose.