Scrambling the Nest Egg: How Well Do Teachers Understand Their Pensions, and What Do They Think about Alternative Pension Structures?

Brief

Scrambling the Nest Egg: How Well Do Teachers Understand Their Pensions, and What Do They Think about Alternative Pension Structures?

Abstract

This paper addresses two questions: How well do teachers understand their current pension plans? And, what do they think about alternative plan structures? The data come from administrative records and a 2006 survey of teachers in Washington State. The results suggest Washington's teachers are fairly knowledgeable about their pensions, though new entrants and mid-career teachers appear to be less knowledgeable than veteran teachers. As for teachers' preferences for plan structure, the survey suggests that when it comes to investing additional retirement savings, a plurality of teachers favor defined contribution plans which offer more portability and choice, but more risk than traditional defined benefit plans. All else equal, teachers newer to the profession are more likely than veteran teachers to favor a defined contribution structure.

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