How Teachers Value Pension Wealth: A Reexamination of the Illinois Experience

In a widely-cited study, Fitzpatrick (2015) found that more than a quarter of Illinois teachers were unwilling to pay 19 cents for pension enhancements worth one dollar in present value. We revisit this finding by tracking the same cohort of teachers to retirement, which permits exact measurement of the annuity received and service years. The vast majority of teachers purchased the upgrade. Among the teachers who did not, the benefit on average had a negative value given their retirement timing. Our analysis finds that Fitzpatrick's instrumental variables fail to capture the underlying heterogeneity of preferences driving this result.