Teachers’ Willingness to Pay for Retirement Benefits: A National Stated Preferences Experiment

Abstract

Many states have recently made or are considering changes to their teacher retirement systems. However, little is known about how teachers value various elements of their retirement benefits versus other aspects of their jobs and compensation. To help alleviate this gap, we use a discrete choice stated preferences experiment embedded in a nationally representative survey of teachers to estimate their willingness-to-pay for various retirement plan characteristics and other non-salary job components. We find that teachers would be indifferent between a traditional pension and alternative retirement plan designs if the alternatives were paired with 2 to 3 percent salary increases. Our results indicate that experience is a significant mediator of retirement plan preferences. While more experienced teachers are willing to pay more to keep their traditional pension plans, inexperienced teachers do not have strong preferences around retirement plan type. However, teachers’ willingness-to-pay for traditional pension plans is less than their willingness-to-pay for many other elements of their compensation, including the value of retirement benefits, retirement age, salary growth, healthcare coverage, and Social Security enrollment.