Courtesy of Zero Hedge is this post about a report that the median state pension plan had a 10 year annual investment return of 5.9% as of June 2016. From the post:
Of course, as we’ve noted on numerous occasions, the problem with those returns is that most public pensions in the U.S. have randomly decided to assume a long-term return of 7.5%, or 1.6% higher than what they’ve actually been able to achieve in practice. All of which only serves to mask the true scale of the pension crisis in the U.S. by discounting future liabilities at an artificially high rate.
All of this generally applies to Mississippi’s PERS, which is in crisis denial mode.
I can’t really find a difference of opinion on whether something like a 60-40 blend of stocks and bonds will return 7.5% over the next 10 years. Everything I read says they won’t because future gains in corporate profits are already baked into today’s stock prices.
By some measures, stocks are way over-valued now. That doesn’t necessarily mean stocks will crash. But it strongly suggests that returns going forward will be anemic.
And some people think stocks are destined to crash again. From the Zero Hedge post:
All of which raises two very important questions: (1) how is it possible that pension underfundings continue to surge when 50% of assets have participated in one of the biggest equity bubbles in history and (2) when the current equity bubble bursts, which in inevitably will, will it result in a cascading failure of retirement systems across the country and finally expose the public pension ponzi for great lie that it has always been?
These are scary thoughts for PERS stakeholders.