- While most public school teachers have access to state-funded pension plans, a study of 51 of the largest school districts conducted by the Thomas B. Fordham Institute reveals that the median crossover point – the amount of time a teacher must work for a school district before his or her retirement benefits will be worth more than personal contributions — is 25 years, District Administration reports.
- Other options are also problematic as nearly half of public school teachers do not participate in social security, 403(b) retirement plans are costing participants almost $10 billion per year in excessive investment fees, and in many cases, the retirement contributions of younger teachers are funding retirement for older teachers rather than their own.
- In most cases, school districts don’t have a great deal of oversight or influence with regard to pension plans, but as school leaders seek to recruit and retain talented teachers, they need to advocate with state leaders for fair retirement packages and educate teachers about what retirement strategies work best for them in their state.
The financing of teacher retirement is a complex issue and one that varies greatly from state to state. While teachers in some states are protesting for greater retirement benefits, other states are having to cut education funding because of the impact of pension payouts. And, as the Fordham study shows, the plans now in place in many states may not benefit teachers as much as they had hoped in the long run. For teachers who move to another state, the situation is usually even worse as most plans are not portable. In addition, younger teachers are sometimes finding that money sent to retirement accounts would benefit them more as cash in hand at the most expensive time of their life.
While it seems natural for school leaders to advocate for more benefits for teachers, that strategy may backfire. According to recent report by TeacherPensions.org, “Districts spending on benefits is growing at a much faster rate than their overall education spending. As a result, fewer dollars are making it into the classroom." The article noted that while benefit spending is up 22% nationally, K-12 spending increased by only 1.6% from 2005 to 2014.
At the very least, school administrators can try to educate teachers about their retirement options, suggesting alternate retirement strategies and long-range financial plans that can offer them a more secure future. School districts may also be able to at least offer free access to the services of independent retirement planners who can sit down individually with teachers and help them better understand the options available in their state. Since most school administrators fall under these same plans, they also will benefit from a better understanding of the status quo until better options come along.