Inside Higher Ed today carries an article about surveys of faculty who say they don’t plan to retire at the “normal” age or maybe ever. The work-til-you-drop response is attributed to such motivations as wanting to be intellectually active but also importantly to concerns about having sufficient funds and health insurance to retire. When UC was considering changing its retirement plan – it created a two-tier program – it retained the defined benefit approach rather than switch to a defined contribution approach. Many faculty in the U.S. are under TIAA-CREF or some similar defined contribution program which means that they face the danger of outliving their savings. Retiree health care is also not necessarily provided.
UC retained its basic defined benefit model in part to encourage faculty renewal. Many years ago, before federal law changed, universities – including UC – had mandatory retirement ages. Once that policy was made illegal, only the defined benefit system provides an incentive to retire. Under defined benefit, the retiree can’t outlive his or her savings. And long service employees essentially end up working for nothing if they continue so the system incentivizes “on time” retirement. Decisions in the future on retirement benefits need to be take account of the behavioral effects of the system.
The Inside Higher Ed article is at http://www.insidehighered.com/news/2013/06/17/data-suggest-baby-boomer-faculty-are-putting-retirement