Rule-of-X and the retirement timing of public school teachers

Abstract

Rule-of-X is a common feature of state and local pension plans in the U.S. It allows workers to retire with full benefits once their age and experience sum to the rule amount, typically between 80 and 90. We study the retirement response to Rule-of-X among Texas public school teachers, where X = 80. The response is substantial and leads to shorter teaching careers, likely due to a change to teachers’ pecuniary incentives and a reference-point effect. If we ignore the latter, we estimate the elasticity of the retirement response with respect to the pecuniary change is 3.3.