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

In this article we focus on 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 that Washington's teachers are fairly knowledgeable about their pensions, although new entrants and mid-career teachers appear to be less knowledgeable than veterans. 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 that offer more portability and choice but also more risk than traditional defined benefit plans. Again, perhaps unsurprisingly, the findings suggest that, all else equal, teachers newer to the profession are more likely than veterans to favor a defined contribution structure.