Retirement Planning Study

Challenges to Retirement Readiness in the North Carolina Public Sector Workforce

OBJECTIVES

The project goal is to provide new insight into the challenges facing older public sector employees as they approach retirement age. Because of differences in workforce composition, compensation, and pension structure, choices facing workers retiring from the public sector differ in important ways from those retiring from the private sector. This project will contribute to our understanding of key retirement-related decisions that workers typically make in the public sector, as well as the factors that influence these decisions. The findings from this research will serve to inform and improve retirement policy in North Carolina.

RETIREMENT DECISIONS AMONG PUBLIC SECTOR WORKERS

Researchers will examine various factors to understand the retirement planning behaviors of public sector workers. Such behaviors include:

• Participation in supplemental retirement plans (e.g., 401(k), 403(b), and 457(b) plans)

• Contribution levels to supplemental retirement plans

• Decisions when to retire (age at retirement from public sector career)

• Decisions to return to work after retirement

• Work after retirement: the motivations and decision to return to work

• Nature of work after retirement: employment in the public-sector vs. private-sector, full-time, part-time work, etc.

RETIREMENT BEHAVIORS: FACTORS AFFECTING RETIREMENT OUTCOMES

Additionally, the researchers hope to discover the factors that influence public-sector workers as a distinct subgroup of the labor force. There is growing evidence that public-sector workers typically may respond to a significantly different set of factors than private-sector workers. Moreover, current literature indicates that public-sector workers may have considerably different characteristics and preferences than their private-sector counterparts.

For example, public-sector workers typically retire earlier than private-sector workers. Workers may be responding to incentives inherent to defined benefit plans that push retirees out of the workforce; however, post-retirement employment is also common among retired public-sector workers. Defined benefit incentives may push workers out, but the flexibility of retiring early, coupled with a guaranteed monthly pension benefit, may encourage workers to return to work for their former public-sector employer part-time. Additionally, household structure and alternative sources of income may also have a significant impact on retirement decisions and behavior. Thus, the financial needs and incentives influencing the decision to retire and to return to work among public-sector workers remain to be elucidated.

Given these differences, researchers plan to examine a number of factors that may affect retirement decisions and outcomes, including:

• Lack of retirement planning

• Insufficient retirement education

• Limited financial literacy

• Annuity options

Insufficient retirement income may lead to an increasing number of retirees who are forced to return to work. As the rules and regulations pertaining to retirees returning to work have become increasingly relevant to retirement policy in North Carolina in recent years, researchers hope to contribute to public sector retirement policy decisions and to improve the overall retirement security of North Carolina's public workers.