Retirement Plan Choices and Outcomes

Abstract

Employees are increasingly opting for defined contribution plans over defined benefit plans when given a choice. But this may not always be the best option. Using data from retirement plans available to employees of public educational institutions we show that, over the last fifty years, employees opting for defined benefit plans would have earned higher pension annuities than defined contribution plan participants in a suprisingly large number of scenarios. This is particularly true for employees who worked in an educational institution for 25 years or less before retirement.

Keywords: defined-benefit, defined-contribution, TIAA-CREF, university employees, retirement plans