Who Has the Best Pension?

Now that we’re up to 37 books about various teacher pension plans (plus one standalone book for young adults), I sometimes get asked, “So, who has the best pension?” My answer is, probably unsurprisingly and definitely disappointingly, “It depends.” While most teacher pension plans have many things in common, the details really matter. And those details can mean that a given pension plan is really good for one person but not as good for another person in the same pension plan. And when you start to try to compare across different pension plans in different locations for different people hired at different times with different years of service and different salaries, those differences increase and interact in complex ways.

But since I have a fair amount of data (and hopefully at least a little insight?) into a bunch of different plans now, I thought it might be interesting (and hopefully useful) to share some comparison data for anyone who is interested. To make the comparisons at least somewhat digestible (you might even say TL;DR), I had to choose which pension features to include and which to leave out. It’s important to understand that some of the ones I decided to leave out could be very, very important to some pension plan members. By necessity, what I chose to include isn’t going to tell the entire story.

Here are the pension plan features I chose to include:

• Teacher Hire Date: Because many pension plan benefits have changed over time, I chose to include two categories of teachers. More “veteran” teachers, which I defined as someone who was hired prior to January 1, 2001, and new teachers, which I defined as being hired after January 1, 2024. This obviously does not include all the various tiers that exist in between those dates in some pension systems, but still gives (I hope) some decent data to compare.
• Type of Plan: Defined Benefit, Defined Contribution or Hybrid Plan
• Employee and Employer/State Contribution: What percent of salary the employee and the employer and/or state contributes to the pension plan. This is an often overlooked piece.
• Multiplier: The multiplier used in the pension formula calculation for defined benefit plans.
• Highest Average Salary: The calculation used for the salary used in the pension formula calculation for defined benefit plans.
• Normal Retirement: The age and number of years of service required to earn a full (non-reduced) benefit.
• Cost-of-Living Increase: Any COLA that applies to the pension benefit after you retire. This can make a huge difference, especially for folks who retire at a younger age and then live for a long time.
• Number of Tiers: Just for reference, the number of tiers of benefits (if any) in the plan in between the teacher hired prior to January 1, 2001 and the teacher hired after January 1, 2024.
• Social Security: Crucially, whether teachers in this plan also pay into Social Security or whether they only have a pension benefit. Again, this is often ignored when comparing plans.
• Supplemental Retirement Plans: Whether teachers have access to supplemental retirement plans through the pension/state and, if so, what the administrative fees are.

While these are the items I felt were most useful for a casual comparison, I again want to emphasize that it leaves out some significant items that can make a huge difference for some members. These include, but are not limited to:

• Part-Time Work: How part-time work is counted. In some plans, part-time work doesn’t earn any service credit. In some plans, it earns prorated credit. And in yet other plans, it earns full service credit as long as you meet some kind of minimum amount of pay or hours. This can have a huge impact on someone’s benefit if they ever worked part-time under the pension system.
• Purchasing Service Credit: The ability to purchase service credit, what types of service credit can be purchased, the amount that can be purchased, and the cost to purchase.
• Disability: Whether any kind of disability is provided and, if it is, the details of the disability plan.
• In-Service Death Benefits: How in-service death benefits are calculated.
• Sick Leave: Whether you can get service credit for unused sick leave and/or whether sick leave payouts are includable salary for your highest average salary calculation.
• Early Retirement: The rules around the ability to retire earlier with reduced benefits, and the reduction factors for early retirements
• Health Insurance: Any health insurance options via the pension plan in retirement and, if there are options, any subsidies related to those.
• Salary: While I included how the salary piece was calculated, the salaries themselves can obviously be very different. Salaries for career teachers in some states top out at around $80,000, in others it’s over $130,000. That obviously can make a huge difference in the ultimate pension amount that isn’t necessarily reflected in the items I chose to include.
• DC and Hybrid Plan Details: For teachers with a Defined Contribution or a Hybrid Plan, I didn’t include the fees and investment choices associated with those.
• Payout Options: The different retirement payout options. While the payout options are somewhat similar across plans, some plans have many more options (and therefore more flexibility that might better meet your individual needs) than others.
• Contributions: This doesn’t take into account that employee and employer/state contributions in some states are elevated in order to pay off an unfunded liability, whereas they are lower in other states because they previously fully funded (or close to fully funded) their pensions. It’s not (necessarily) that some states/employers contribute more than others, it’s that some states/employer are making up for previous underfunding.

So here is the comparison spreadsheet. If and when we complete additional books, I will add them to the spreadsheet. Because there are so many pension plans on the spreadsheet, and because I was going through books written over the last three years or so, there are undoubtedly some mistakes on the spreadsheet (either because something has changed that I don’t know about, or because I simply typed something wrong). If you find something you think is incorrect, please contact me with the correction(s) and I will update the spreadsheet.

I hope this is useful for some folks in some way. If nothing else, I hope it helps illustrate that if someone refers to “teacher pensions” generically when talking about any topic you should be wary of any conclusions they draw. Each “teacher pension” is different, often in very significant ways, and even different individuals within a single pension can experience very different outcomes. While perhaps inconvenient, any discussions around “teacher pensions” have to be aware of, acknowledge, and take into account those differences.

“Comparison is the thief of joy.” – Attributed to Theodore Roosevelt