Increasing Number of Retirees Driving Pension Expenditures
The two largest pension systems in Massachusetts are the Teachers’ Retirement System and the State Employees’ Retirement System. They provided billions of dollars in pension benefits for approximately 130,000 people in 2023, accounting for a majority of those in MA receiving public pensions.
Both these systems have experienced increases in benefits paid since 2013, with the State Employees Retirement System’s payout rising 74 percent from $1.6 billion in 2013 to $2.8 billion in 2023, and the Teachers’ Retirement System’s payout rising 42 percent from $2.4 billion in 2013 to $3.5 billion in 2023.
Figure 1: MassOpenBooks: 2023
Change In Average Pension
The average pension for teachers increased 18 percent from $42,654 in 2013 to $50,177 in 2023, and the average pension for state employees increased 39 percent from $31,111 to $43,302. However, according to the Bureau of Labor Statistics’s inflation calculator, $42,654 in 2013 was worth approximately $56,000 in 2023, meaning that teachers experienced an effective decrease in average pension. State employees experienced a slight increase when adjusted for inflation, as their 2013 pension of $31,111 is worth about $41,000 in 2023.
Figure 2: MassOpenBooks: 2023
Increase In Number of Retirees
Part of this rise in payouts appears to be caused by an increase in the number of retirees. According to MassOpenBooks, the number of retirees across the two systems grew 23 percent between 2013 and 2023, from 108,371 to 133,154. In comparison, the total expenses of the two systems in 2013 (using 2023 dollars) was about $5 billion, whereas the 2023 expenses were $6.3 billion, a 26 percent increase.
The departments that contributed the most to growth in the number of retirees include the Department of Corrections, the State Police, the Department of Transportation, and the University of MA Medical School, which together accounted for over 4,500 new retirees, according to MassOpenBooks. Unsurprisingly, these departments also have a large number of participants in the State Employees’ Retirement System, accounting for over 10 percent of all retirees in the two pension systems in 2023. Pensions for these four departments grew over $300 million from 2013 to 2023, a 120 percent increase.
The large increase in retirees from these and other departments may result from the large baby boomer generation transitioning out of the workforce, as almost 10,000 baby boomers reach retirement age (65) everyday in the US.
About the Author: Raif Boit is a Roger Perry Transparency Intern at Pioneer Institute for the summer of 2024. He is a rising freshman at Harvard College.
