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What High Teacher Turnover Means for Retirement Savings

What High Teacher Turnover Means for Retirement Savings. Chad Aldeman Chad.aldeman@bellwethereducation.org EWA Conference, May 19, 2014 . Pension plans can tell us a lot about teacher turnover rates. Nationally, 41 percent of new teachers leave within their first 5 years.

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What High Teacher Turnover Means for Retirement Savings

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  1. What High Teacher Turnover Means for Retirement Savings Chad Aldeman Chad.aldeman@bellwethereducation.org EWA Conference, May 19, 2014

  2. Pension plans can tell us a lot about teacher turnover rates. Nationally, 41 percent of new teachers leave within their first 5 years. No other regular source of state or local data. Pension systems have to estimate how long a teacher will stay in the plan and how much they’ll receive in future benefits. All pension plans publish “withdrawal” tables that are based on the probability a teacher will leave in a given year, adjusted for years of experience, age, and gender. Plans periodically conduct “experience studies” to check their assumptions. 2

  3. Every pension plan has to estimate retention. Convert these one-year figures to estimate longer-term retention. Example: These are Illinois’ withdrawal rate assumptions: 3

  4. The result is that many teachers don’t stay long enough to qualify for a pension. Source: Public Pensions Plan Database

  5. The largest benefits accrue to those who stay 25-30 years.

  6. Many teachers fail to reach important career milestones. The results vary, but in the median state: • Less than half of new teachers will qualify for a pension benefit from the pension system. • Less than one-in-five will remain for their entire career. 6

  7. Most teachers face large retirement savings penalties. States impose different withdrawal rules: • 7 states provide only the teacher’s own contribution • 41 states provide the teacher’s contribution plus interest • Only 2 states provide the teacher’s contribution, the employer’s contribution, and interest Nationally, the average employer contribution is 17%. At that rate, a non-vested teacher earning a $40,000 salary would forfeit $6,800 in employer contributions per year, plus interest.

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