The Alternate Incentive to Early Teacher Retirement

The major emphasis of the study was to formulate an answer to the question being asked by the study group under the Illinois Project for School Reform, How to improve the quality of teachers within the school system? Specifically, this study analyzed the results of a study done by the Planning and Research Department of the State Board of Education, prepared in April 1977. Under this study\u27s proposal, four areas of substantial disincentives were identified as reasons for teachers not taking early retirement. The age discrimination effect has since been overcome with early retirement incentives now being offered in many schools throughout the state of Illinois. Other areas, such as the longevity effect, the salary growth effect and the real income effect, were considered in developing a new proposal for a model for an early retirement proposal using an annuity system along with the Illinois Teachers\u27 Retirement System\u27s early retirement formula table to overcome disincentives. The option to retire early from teaching with better than the 38-year, 75% payout now allowed by the Illinois Teachers\u27 Retirement System could be used for attracting top high school students towards the teaching profession. By allowing teachers a second career choice after twenty years of teaching, burn-out in the profession could become minimal. By adding the annuity-based early retirement system, a new option becomes available to administrators and teachers retiring when teacher evaluations begin to become dismal, the thought of teaching students has lost appeal, and the energy level is at a new low. A review of the research and literature revealed the successes and the failures of businesses in handling early retirement programs. The reason for retirement benefits was analyzed and the failure of the social security program was reviewed in comparison with the success of other retirement systems. Current early retirement programs now in existence throughout the state of Illinois were reviewed along with research information done on retirement from the Illinois Office of Education, Research and Planning Department. A plan of action was formulated from researching data on the Flora School District Unit #35 Teachers\u27 Pay Schedule, years of service within the district, teacher distribution on the salary schedule, the present teacher retirement multiplier table by years of service from the Illinois Teachers\u27 Retirement System, and a Prudential Annuity System Package. Data on the Flora teachers was presented in the form of a distribution table and analyzed by the amount of retirement benefits a teacher could receive at the end of fifteen years, twenty years and at age 60 upon retirement from the teaching profession. With a $100 monthly annuity system option added to the existing Illinois State Multiplier Formula Table, a new option becomes available for teachers wishing to retire early. Any retirement percentages before attaining the creditable service of 38 or more years and attaining an average salary multiplier of .7500, or greater, was considered significant. The greater percentage of retirement benefits at earlier ages of years of creditable service was analyzed in comparison to estimated real income and retirement benefits at the end of full salary and retirement years without the annuity addition. The informational data showed findings consisting of: 1. An annuity system along with the retirement system\u27s average state multiplier allows teachers to have varying degrees of percentage increases in retirement benefits beyond the maximum of 75% after 38 years of creditable service. 2. The earlier that an annuity is purchased shows definite advantages to the real cash value of the annuity by age 60; thus showing, there is a place in a teacher\u27s career where it would be more of an incentive and more profitable for teachers to option for early retirement. 3. The initial outlay for the Flora School System, with the overall savings, would be very advantageous in the long run under the annuity system option. 4. The disincentive areas of longevity effect, salary growth effect, and real income effect can be overcome with new options available on the market today. Finally, it is recommended that the state should allow implementation of this study into a pilot project with the use of the Flora School District