Teachers Fare Better With Existing Pensions Than 401(k)s, Study Shows

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For the vast majority of teachers, existing pensions provide a higher, more secure retirement income than a cost-equivalent 401(k)-style plan. And pensions keep teachers in classrooms, according to a new study from UC Berkeley and the National Institute on Retirement Security.

Conducted by Nari Rhee, director of the Retirement Se­curity Program at UC Berke­ley’s Labor Center, and actu­ary Leon F. “Rocky” Joyner, Jr., of Segal Consulting, the study shows that switching to an account-based retirement system such as a 401(k) would sharply reduce the retirement income security of most teach­ers in the U.S.

The study looked at the ca­reer patterns and pension ben­efits of public school teachers in six states: Colorado, Con­necticut, Georgia, Kentucky, Missouri and Texas, which were chosen to represent geo­graphic and teacher diversity. Concerns over retirement secu­rity and government efforts to take away pensions prompted walkouts last year in Colorado, Kentucky and elsewhere.

“Contrary to the claims made by a number of studies, pensions are good for teach­ers and they’re good for school systems,” said lead author Rhee. “They generate higher retirement income than 401(k) s for most teachers, and they in­centivize experienced teachers to stay in the classroom, reduc­ing turnover.”

“Concerns about improv­ing retirement benefits for the small minority of teachers who won’t stay until retirement are best addressed by modifying traditional pensions for greater portability,” says report co-au­thor Joyner. “The report finds that switching to a 401(k) will make eight out of 10 teachers worse off.”

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