How Prepared are State and Local Workers for Retirement?

A widespread perception is that state-local government workers receive high pension benefits which, combined with Social Security, provide more than adequate retirement income. This study uses the Health and Retirement Study (HRS) and actuarial reports to test this hypothesis. The major finding from the HRS analysis is that most households with state-local employment end up with replacement rates that, while on average higher than those in the private sector, are well below the 80 percent needed to maintain pre-retirement living standards. Even those households with a long-service state-local worker – those who spend more than half of their careers in public employment – have a median replacement rate, including Social Security, of only 72 percent. And this group accounts for less than 30 percent of state-local households. The remaining 70 percent of households with a short- or medium-tenure state-local worker have replacement rates of 48 percent and 57 percent, respectively. Adding income from financial assets still leaves most state-local households short of the target.