Teacher Pensions vs 401(k)s in Six States: Connecticut, Colorado, Georgia, Kentucky, Missouri, and Texas

“Backloading” refers to the fact that under a typical DB pension, the longer an employee works in the same retirement system, the faster the growth in retirement benefits in relation to pay. [...] Estimating the pension advantage Finally, we applied the findings from the benefit analysis to the results of the tenure analysis to calculate the share of active members who will receive greater benefit from the pension compared to both an idealized 401(k) and a more realistic 401(k). [...] Building on our analysis of teacher exits in relation to vesting and retirement eligibility, we compare the value of benefits from the DB pension and hypothetical 401(k) at early retirement age for the typical teacher in each state. [...] Next, we estimate the share of teachers who are better off in the DB pension, based on the projected exit age and service year accrual, compared to the Idealized 401(k) and the Realistic 401(k). [...] Variation in the ratio of DB pension value across states is attributable to both the relative generosity of benefits and the age and service of the exemplar teacher.