Posted on 07/23/2016 4:22:05 AM PDT by george76
The leaders of Colorado’s Public Employee Retirement Association (PERA) assure us that if we have patience, long-term investment returns of 7.5 percent will fully fund the program’s promises to retirees over the next 40 years or so.
But what if those returns fail to materialize?
Moving PERA from the current defined benefit plan to a defined contribution or cash balance-style plan would remove much of the burden of returns falling short from taxpayers, while helping along the long-term financial health of PERA.
Coloradans got a taste of that this past year, when PERA achieved a paltry 1.5 percent return on its assets. PERA Executive Director Greg Smith has dismissed concerns over the low returns, saying that PERA’s investment managers outperformed both their counterparts at other public pensions across the country and PERA’s own benchmarks.
But the consequences are real, and not so easily dismissed.
The market value of PERA’s assets fell roughly $1.6 billion to $42.5 billion, and the unfunded liability – promises the fund lacks sufficient money to cover – ballooned nearly $4 billion to $28.4 billion. PERA now has the money to pay for only three-fifths of its promises
...
analysis gave PERA’s State Fund – which provide benefits for state workers – a one-in-four chance of ending up 20 percent funded in 30 years, and of the school fund ending up 30 percent funded. That’s the same chance as flipping a coin twice and getting two heads. That same analysis found a better than 1-in-10 chance of each becoming insolvent in that same time period.
...
Starting now, we can begin to move the investment risk back where it lies for the rest of us: to the employee.
(Excerpt) Read more at postindependent.com ...
With 3 % bond rates good luck getting 7.5 %.
With the Fed holding rates low? Risky. Of course they have only been pumping the balloon to support Zero. $85 Billion a month plus Trillions. Watch them slam the brakes on in January and the MSM will blame Trump.
We have now seen what happens when the government tries to simply divide that wealth equally among its citizens. IT STOPS GROWING. What had been a nearly guaranteed return close to 10% is now stagnant near zero. The choice is quite simple: allow those who create wealth to keep some of it, or condemn all to equally distributed poverty (except, of course for the corrupt bureaucrats who administer the distribution).
Then you become California, Illinois, Michigan or any one of a dozen other states that have cooked their books to make it look like things are going to be rosy for their retirees to keep their votes coming in.
I read the weekly commentary of John Hussman who runs the Hussman Funds. He says the stock market at these levels are likely to have close to zero gains over the next 10 to 12 years. Not good for people with 401K’s if he is accurate.
Why would you pay any attention to what Hussman writes? The performance of his flagship fund over the past 12 years has been dismal, and he charges a 1.4% fee to destroy investors’ wealth.
7.5% is outstanding for annuity accounts. The liberals just want to tax more to increase their annuity payout.
Colorado has a real problem with too many retirees making big bucks for just a few year’s “work”.
I just like reading his commentary. He is one guys that hit for a decade or and then blows up. I remember Bill Miller from the Legg Mason got into a funk after a good run..
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