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More bad news

Wednesday, Jul 27, 2016

* Pearson

The Wall Street Journal is reporting that long-term investment returns for public pension plans are poised to drop to the lowest rate of return since measuring began 16 years ago —something that could cause additional heartburn in Illinois, which has the largest unfunded state worker pension program in the nation.

The Journal reported the 20-year annualized return on investment of public pensions are expected to be 7.47 percent — a far cry from the 12.3 percent annualized return in 2001, when Wilshire Trust Universe Comparison Service began tracking pension returns.

Illinois has an $111 billion unfunded pension liability as of June 2015, based on the latest state reports available. But the lower investment returns have been factored in slightly.

The largest pension fund, the Teachers Retirement System, acted two years ago to reduce its expected investment rate of return from 8 percent to 7.5 percent. The State Employees Retirement System and the State University Retirement System acted to reduce the rate of investment returns for its funds from 7.75 percent to 7.25 percent.

* Related…

* Illinois diverts federal funds from teachers to pensions: Unlike their counterparts in other states, Illinois school districts pay a steep premium to the Teachers’ Retirement System, or TRS, if they use Title I federal money to hire teachers. Districts are assessed 36.06 percent of salaries paid with federal Title I funds, and that is set to increase to 38.54 percent for the 2016-2017 school year. By comparison, the rate for a district not using Title I money is and will remain 0.58 percent. So a district using Title I money to hire a teacher at $50,000 a year would fork over $19,270 to TRS, but the tab for a district paying a teacher the same salary out of state and local funds would be $290. To paraphrase U.S. Rep. Robert Dold, taxpayers from across the nation are pouring vast sums into Illinois’ teacher pension-debt quagmire. And the biggest losers? The very ones the Title I money is intended to aid – low-income students.

- Posted by Rich Miller        

  1. - Anonymous - Wednesday, Jul 27, 16 @ 10:13 am:

    Face facts, Illinois ‘aint coming back. Too much debt, when the state income tax is significantly raised, the wealthy will flee. Can’t generate enough income, and then when the next recession hits, …….

  2. - Almost the Weekend - Wednesday, Jul 27, 16 @ 10:21 am:

    Tier 1 employees need to compromise or they will not receive any of their money. They can argue the IL Constitution gives them this right, but the reality is math is the final and most important factor.

  3. - Reality Check - Wednesday, Jul 27, 16 @ 10:22 am:

    This actually isn’t news. Read closely. It’s a 20-year annualized return, meaning the average return for the last 20 years. We already know what those were. We already experienced the 2001 and 2008 market drops. And as the article notes, the expected rate of return for Illinois retirement systems already matches this 20-year annualized number.

  4. - Sue - Wednesday, Jul 27, 16 @ 10:23 am:

    Shocked just shocked that pension returns are awful prompting more tax money into a rathole

  5. - Reality Check - Wednesday, Jul 27, 16 @ 10:26 am:

    Good lord, lot of uninformed people in this thread already.

    @Anon 10:13, there is zero evidence to show that tax rates impact where rich people choose to live.

    @Almost the Weekend, math dictates raising revenue, not pretending that the Constitution doesn’t exist.

    @Sue, annualized returns of 7.5% per year is hardly “awful”, especially when the time window includes two world-historical market meltdowns.

  6. - Cassandra - Wednesday, Jul 27, 16 @ 10:34 am:

    Actually, because Illinois’ income tax is regressive, the wealthy would benefit from staying in Illinois, even if our political masters of both parties succeed in raising it. The wealthy pay a far lower percentage of their income in Illinois than do lower and middle income taxpayers. this is well known to our political masters but rarely acknowledged.

    Now, what’s the top rate in say, California…?

  7. - X-prof - Wednesday, Jul 27, 16 @ 10:35 am:

    What the math tells us is, with income inequality at current levels, IL can’t afford a tax system that is so regressive that those in the top 1% carry 1/3 the total state and local tax burden shouldered by the bottom 20% of taxpayers. Fix that, bring IL in line with most other states (so no mass exodus), and things will work out fine. We could pay down the pension debt, fund our schools, restore social services, give some property tax relief, etc. Credit ratings would go up immediately and debt service costs would drop. Compare that to the doubtful gains (if any) from the governor’s TAA.

    This is so tiresome. If you can’t do the math, don’t post.

  8. - Anonymous - Wednesday, Jul 27, 16 @ 10:38 am:


    The flip side of your argument is that folks in this state have cashed in on money that belongs in that TRS fund and our leaders have been able to keep taxes low for you, courtesy of TRS.

    Some might say, it’s time to repay what is owed to TRS with interest.

  9. - jdcolombo - Wednesday, Jul 27, 16 @ 10:41 am:

    In addition to what Reality Chec @ 10:26 said, the whole idea of “full funding” for state pensions is a canard. We demand full funding for private pensions mostly so that when these companies go under (as they inevitably do), the money will be there to pay the pensions promised to employees.

    But states don’t go out of business, and they cannot go bankrupt under current law. You don’t need a pile of money sitting in Scrooge McDuck’s vault to fund pensions for the day when the state no longer exists. You do need SOME asset cushion, to take care of situations like 2008-2010 where the recession is so bad that revenues can’t cover all of a state’s obligations, and borrowing may not be possible or advisable. But the notion that you need 100% of the actuarial cost of your pensions (or even 90% or even 80%) is crazy. It’s an accounting convention that has been hijacked by financial conservatives to use as a battering ram to lower state worker benefits because they don’t want to pay taxes. Simple as that.

    Historically, Illinois pension funds have been funded at about a 40% level forever. And they have been paid, every year. So when people throw around the $110 billion underfunding number, they are largely using it as a scare tactic. And the sad part is that more than a majority of voters buy it, because they have no real understanding of the background financial issues. Think of it this way: the state’s outstanding bonds are also a liability, just like the pension obligations, but we do not have a “sinking fund” for bond payments. Instead, the state simply pays what it owes every year out of general revenue funds. Why isn’t anyone commenting that in order to pay off its bonds, the state will owe XXXX billion in interest and principal over the next 50 years, and OMG, it should have a sinking fund with that much money in it?

    The answer is because the creditors don’t want to bludgeon state bond debt, which makes them money; they only want to bludgeon state workers.

  10. - JS Mill - Wednesday, Jul 27, 16 @ 10:53 am:

    @Sue- TRS investment returns consistently outpace wall street. You are welcome.

    =To paraphrase U.S. Rep. Robert Dold, taxpayers from across the nation are pouring vast sums into Illinois’ teacher pension-debt quagmire=

    What a silly statement attributed to Dold. While the numbers are acurate (pension %paid on employees paid with federal dollars, not just Title 1) most districts have moved salaries out of federal grants to avoid the huge losses. I would guess (definitely could be wrong) that CPS uses federal dollars to pay salaries because of how much they get.

    Instead, federal funds are used to pay for services and supplies, but Thanks Rep. Dold for demonstrating how little you know.

  11. - Reality Check - Wednesday, Jul 27, 16 @ 10:58 am:

    Amen and thank you @X-Prof.

  12. - OldIllini - Wednesday, Jul 27, 16 @ 11:11 am:

    ==IL can’t afford a tax system that is so regressive that those in the top 1% carry 1/3 the total state and local tax burden shouldered by the bottom 20% of taxpayers.==

    Hard to do math on that mish-mash, but we’ll try.

    So these numbers combine all taxes: income, property, sales. The bottom 20% of taxpayers–does that include those who pay zero tax? And to compare apples with apples, a top 1% taxpayer then pays 6.66 times the tax of a bottom 20% taxpayer. So how is this regressive?

  13. - Harry - Wednesday, Jul 27, 16 @ 11:14 am:

    You really have to read closely to understand that the 36%+ assessment is based on the actuarially determined State contribution rate to TRS, which includes amortization, and the argument is whether it is appropriate that current Title 1 funds be used to pay more than just current normal cost.

    Beyond that, wow, everyone has an opinion and every opinion is based on emotion with facts selectively cherry-picked to confirm their biases. Both sides.

    A dollar is a dollar, and as one of those interviewed in the article suggested, he doesn’t like the current arrangement but he is scared of one of the the alternatives.

  14. - Grandson of Man - Wednesday, Jul 27, 16 @ 11:15 am:

    According to this article, millionaires migrate out of states less than the rest of the population.

    As we can see, we desperately need revenue to start paying down our massive pension debt.

    I don’t think we need to fear shifting more of the tax burden on top earners in Illinois. Nor should we succumb to the oldest scare tactic in the world, used by Rauner and think tank types, that the rich will leave if we raise the state income tax on them.

  15. - Pot calling kettle - Wednesday, Jul 27, 16 @ 11:18 am:

    ==if they use Title I federal money to hire teachers. Districts are assessed 36.06 percent of salaries paid with federal Title I funds, and that is set to increase to 38.54 percent for the 2016-2017 school year.==

    Just helped put together a school budget (as a school board member). Ran into this issue. VERY frustrating to try to figure out how to maximize benefit to the district when paying a teacher’s salary is the way we need to go, but it takes revenue from other needs.

  16. - jeffinginchicago - Wednesday, Jul 27, 16 @ 11:19 am:

    @jdcolombo you raise a very interesting question. What should the State funding % be? For a State with growing population and economy a lower target is feasible because you are adding workers that pay into the system. With a mature ecomomy and stable population doesn’t the target % need to increase? Is some %

  17. - Federalist - Wednesday, Jul 27, 16 @ 11:20 am:

    SOS. The pension systems have done extraordinarily well over the decades. Everybody, even Rauner, knows that the fault is the state underfunded to spend on other areas of government.

    However, I expect the outcry for ‘pension reform’ (that means reduction) will become even louder when the pension systems earn in the 5-6% range in the future.

    Social Security is already under attack particularly for middle and slightly upper middle income workers. The ‘fix’ by the left is to tax these workers plus high income workers by taxing all earned income and then redistribute ever more to low income workers whose contributions to the SS system have been quite low. Again more redistribution.

    So this is going to get very, very nasty over the next decade or so at all levels. But government pensions will be attacked first and most viciously because the number of people involved are small and there fore more vulnerable to attacks.

  18. - Federalist - Wednesday, Jul 27, 16 @ 11:23 am:

    Despite what some continue to say in an attempt to mislead people, the Illinois income tax is NOT regressive. Nor is it progressive. It is also not a flat tax but a flat percentage of income tax.

    That simple.

  19. - AnonymousOne - Wednesday, Jul 27, 16 @ 11:24 am:

    Thank you jdcolombo@10:41.

    Having read much about this conspiracy to paint the pension funds as dooming the state, I have also read that the likes of Ty Fahner and the Civic Committee have dredged up the doomsday propaganda specifically to ward off any talk of tax increase or change of any kind. Smart people look at that and understand that it is in the top earners benefit to keep things as they are and deflect any attention away from their great reserves with thoughts of increasing taxation on them. In this case, public workers.

    No doubt this debt needs to be paid—and a payment made every year. No more pension holidays. But it has been a very successful campaign to deflect and demonize public workers and portray them as living lives of luxury/extravagance. Who really lives in luxury? And why would they be so upset about a public retiree earning 40K/year when that is their pocket change?

    Deflection is very effective.

  20. - Anonymous - Wednesday, Jul 27, 16 @ 11:31 am:

    Cassandra, what is the top rate in Florida, TN and Texas?

  21. - Federalist - Wednesday, Jul 27, 16 @ 11:32 am:

    Will high state income tax rates drive the ‘wealthy’ out of the state? First, one would have to see the tax rate on incomes to see what wealthy actually means. There seems to be different views on this. Some have called for a ‘millionaires’ tax while others want a rate that extends down into the lower ranges of upper middle class (200k for the sake of discussion.

    Second, such wealthy individuals whose jobs are in the state and are dependent upon being in that state are not likely to leave. When their jobs do not depend upon living in the state they will most assuredly leave. How this would all pan out in the final analysis is conjecture.

  22. - Liberty - Wednesday, Jul 27, 16 @ 11:34 am:

    Universities have the same policies with grants. Federal grants pay to hire research staff and they have to pay the state costs of pensions. This was mentioned by many university employees during the great pension theft debate.

  23. - JB13 - Wednesday, Jul 27, 16 @ 11:37 am:

    I will find it very interesting if the Democrats and their public employee union backers can find a candidate willing to honestly run on the proposition that all the state’s financial problems can be solved by a massive tax increase. The smart guys here at CapFax obviously believe this to be the case. So when will we see the candidate willing to attach his/her name to that belief (which seems to be so prevalent among the public sector union folks) print the buttons, bumper stickers and T-shirts, and run on the proposition? Anyone seriously believe the people of Illinois will go along with the idea that they should just suck it up and pay more, because public workers have suffered enough?

  24. - Anonymous - Wednesday, Jul 27, 16 @ 11:38 am:

    OldIllini—many on the left want to look solely at the state income tax and declare it too low. They don’t want facts introduced such as high sales taxes, high real estate taxes, etc.

    They can’t make their argument if other important criteria is included.

  25. - Illinois bob - Wednesday, Jul 27, 16 @ 11:38 am:


    =The wealthy pay a far lower percentage of their income in Illinois than do lower and middle income taxpayers.=

    That’s not really true, Cassie. The less you make, the bigger the impact of education credits, real estate tax credits and dependent deductions on your effective tax rate. The “rich” typically make much of their income from dividends and capital gains, and Illinois taxes them as regular income.

    The outcome of this is that 50-60% of earners pay no Illinois income tax at all, and many of them are “middle income” depending on your definition.

  26. - JohnTwig - Wednesday, Jul 27, 16 @ 12:01 pm:

    It’s difficult to visualize how the “time value of money” works in a defined benefit retirement system. Several years ago (with the help computer whiz a grandson) I created a model of the current SURS Tier I system. (I am retired under a prior, less generous version.) This model will perform the math for you and shows a good estimate based on YOUR assumptions. You may be surprised how well the plan works for both employee/retirees and taxpayers.

    I suggest you start with the assumption that the employer will contribute at least the same percent of salary that would be required of Social Security and also the same 7.25% earnings estimate SURS currently uses. After you see how those assumptions work out, let your imagination go wild. It’s more fun than most computer games!

    See try model go to:

  27. - Liberty - Wednesday, Jul 27, 16 @ 12:20 pm:

    Also reported by the WSJ: Not Just the 1%: The Upper Middle Class Is Larger and Richer Than Ever
    Research shows the number of upper middle class households has more than doubled since 1979. The upper middle class in the U.S. is larger and richer than it’s ever been. He finds the upper middle class has expanded from about 12% of the population in 1979 to a new record of nearly 30% as of 2014.

  28. - Ron - Wednesday, Jul 27, 16 @ 12:25 pm:

    More of the same from the usual suspects. Illinois has the third highest state and local tax burden in the nation. One of the worst unemployment rates and job growth is anemic. We have a coddled public sector that has outrageous protections to the detriment of private sector workers. And Illinois is losing population at a faster rate than all but West Virginia. No one wants to live here, higher taxes won’t help.

  29. - chicagonk - Wednesday, Jul 27, 16 @ 12:30 pm:

    @jdcolombo I completely disagree with your argument. First of all, 100% funding is a present value of future liabilities. The discount rate should equal the required rate of return, which Illinois aggressively sets at 7.5%. If Illinois was 100% funded, the state would still need to return 7.5% annually just to keep the pension system fully funded.

  30. - Sue - Wednesday, Jul 27, 16 @ 12:48 pm:

    To all of you singing The praises of TRS investment returns- they have not yet released this past FY return. Given what is occurring else where get ready for sub ONE percent

  31. - jdcolombo - Wednesday, Jul 27, 16 @ 1:14 pm:

    Chicagonk @12:30

    You misunderstood my argument. My argument is that the state does not need 100% actuarial funding at all regardless of the discount rate. States can choose to pay pension obligations as they come due at least partly on a paygo system out of current revenue. That’s what they do with EVERY OTHER obligation, whether it be salaries, interest/principal on bond debt, private business invoices for services, etc. They don’t estimate the future cost of government services and put the present value of that cost in a sinking fund to pay for them.

    The reason people have fixated on 100% actuarial funding is because this is what we demand (more or less) in the private sector. We demand it in the private sector because the business making the pension promise might well not be able to fulfill that promise by the time the payment comes due, because private businesses die. If we don’t demand full funding of private pensions, then when the company goes belly up, then the workers would not get their promised pensions and as a society we have decided we are not comfortable with letting workers assume that risk, nor do we want the government to assume that risk (although we do have the PBGC to help out with the residual risks involved in private pension systems - like a too-optimistic discount rate). We also demand it in the private sector so that private businesses do not underestimate the true cost of labor to potential investors; there is a policy reason we demand public companies have audited financial statements and there is a strong policy reason for such audited financial statements to require accounting for the present value cost of future obligations.

    Unlike private companies, however, states do not die. Whether we like or it not, they live forever. So taking a concept from the private sphere, where it makes policy sense, and applying it to the public sphere, where the financial considerations are completely different, is silly.

    The real question is the one raised by jeffinchicago @11:19: what is a reasonable funding level for state pensions? You clearly need SOME funding (asset base) to help make payments when there are serious revenue downturns that can’t be covered by raising taxes, cutting spending, borrowing or some combination of all three. But you don’t need 100%.

    Here is a link to an article that explains this in more detail, and suggests that maybe 50% is the right target, rather than 100%. It also notes that Social Security is largely funded out of current revenues, not by asset returns.

    People who demand that the state fund 100% of the actuarial liability either do not know why they are making that demand, or they are being disingenuous. There is no financial reason to demand 100% actuarial funding by a government, as opposed to a private business. I don’t know what the “right” percentage is, but I’m confident it isn’t 100%, or even 90%.

  32. - Federalist - Wednesday, Jul 27, 16 @ 1:22 pm:

    @John Twig

    “I suggest you start with the assumption that the employer will contribute at least the same percent of salary that would be required of Social Security”

    Why would a state employee use that number when the employee contributes 8%, at least in SURS?

  33. - Echo The Bunnyman - Wednesday, Jul 27, 16 @ 1:24 pm:

    I believe this is by design. Simple math. What happens if the state shows they can’t tax and cut to catch TRS up? Can Puerto Rico be the plan? If the state makes the case between the solvency of the state or the state constitution protection of the pensions of TRS? Fed bailout? Is there any legal questions to the Supreme Court of the United States to show no chance of paying the bill and keeping the state running? Honest question as I expect someway that will be found not to pay.

  34. - Arthur Andersen - Wednesday, Jul 27, 16 @ 1:25 pm:

    Sue, always with the bitterness about TRS. I’m convinced you tried to get hired there and couldn’t make the cut. I have heard it’s a great place to work.

    To the Post, it is likely that all the Illinois funds will have returns similar to our California counterparts. I haven’t seen any pension or endowment report a return higher than 2.0% for FY2016 to date. The WSJ article does a decent job of explaining why-bond yields low, equities topping out, especially overseas, and (from AA) alternative investment returns varying “in the extreme.”

    Notwithstanding, TRS’ investment performance has for the better part of the last fifteen years or so consistently ranked in the top quartile of the Wilshire TUCS universe cited in the WSJ article, with a period of top decile performance in the mid-2000s. Their 30-year return exceeds 8 percent annually as of FY 2015. Sure, there are a couple bad years in there, and a couple terrible ones. One is naive in the extreme if they believe a large diversified portfolio of assets is always going to go up, up, up.

    I respectfully disagree with you, Professor Columbo. Bond debt and Pension debt are fundamentally different obligations. A pay as you go model for pensions is what Illinois basically had before the ramp program and it worked very poorly.

  35. - Touré's Latte - Wednesday, Jul 27, 16 @ 1:34 pm:

    Reading through the 2015 TRS CAFR, it looks like expenses (which include management fees) are pretty much completely responsible for the sorry state of the TRS. A passive 500 index fund from just about anywhere, over the same ten year time frame on p107, would have them around $72 million and counting.

  36. - Touré's Latte - Wednesday, Jul 27, 16 @ 1:36 pm:

    Sorry. $72 Billion.

  37. - Ron - Wednesday, Jul 27, 16 @ 1:38 pm:

    Illinois is effectively insolvent. People are fleeing at along rates. Higher and higher taxes will only make the problem worse as we already have the third highest tax burden in the country. Program cuts must tbe made, jobs must be slashed all so a small coddled class of public sector workers can get their outrageous benefits.

  38. - Rich Miller - Wednesday, Jul 27, 16 @ 1:39 pm:

    ===Illinois is effectively insolvent===

    Let’s say you’re struggling to claw your way out of debt and have been slowly doing so after you get a raise from your employer. Then you request that much of your raise be rescinded.

    Ergo, our current situation.

  39. - Arthur Andersen - Wednesday, Jul 27, 16 @ 2:19 pm:

    Toure’s, your post makes no sense. I’m looking at the same page of the same report-it’s a 10-year chart of “retired members by age and years of service.” Nothing on that page about investments or fees.
    If you’re trying to say that sticking all the money in an S&P index fund would have saved $72 billion, well, that’s just ridiculous. I estimate TRS’ total expenses over the past ten years at just over half that, with 95% being the payment of benefits. (See page 108 of the CAFR.)

    Get back to us when you have a coherent argument, k?

  40. - jdcolombo - Wednesday, Jul 27, 16 @ 2:20 pm:

    Arthur Andersen @ 1:25.

    I’m not suggesting a full PAYGO system. I’m only pointing out that the hue and cry over the funding “shortfall” is driven by a narrative that the state must have 100% funding. I think that narrative is blatantly wrong. And I also think that the narrative is being deliberately supported by interests whose primary objective is to reduce state worker benefits. It’s a common political tool, and I simply would like for someone to present the counterargument and start talking about it rationally.

  41. - Chicagonk - Wednesday, Jul 27, 16 @ 2:23 pm:

    @jdcolombo I understand your argument. It’s the “kick the can” approach. Politicians love this approach because they can continue to dole out the goods while avoiding paying the bill for those goods. It encourages fiscal irresponsibility (exhibit A being the state of Illinois) and keeps politicians from being held accountable for their actions.

    TRS paid out $5.6 billion in 2015 pension benefits. This was more than double what they paid out in 2005 ($2.6 billion). In 2025, this expenditure from the TRS fund is projected to hit $8.5 billion. Currently, TRS employees pay $1 billion into the system every year. This figure is projected to steadily decline every year until 2045 when it will hit $528 million (TRS will need to pay out $15.2 billion on the other hand in 2045). If Illinois were to drain this pension fund (assuming no additional state contributions, but maintaining the employment contributions and the 7.5% return on the existing plan assets, the fund would be drained in 8 years. The state would have to then come up with $8 billion just to meet the current year’s pension benefit expenditure. And that’s just TRS! Imagine how that will go over with taxpayers.

  42. - Chicagonk - Wednesday, Jul 27, 16 @ 2:34 pm:

    @toure Administrative expenses were $21 million. Benefits paid were $5.5 billion. Now you bring up a good point that TRS and the other state pension funds have way too many hedge funds handling their investments and their fees are not included in the $21 million. TRS investment management fees for 2015 were $267 million. That is a lot and just looking over all of the investment managers that they have, they clearly have way too many. So there are fees that they could significantly reduce on the investment management side. I would hope that they are doing this.

  43. - Ghost - Wednesday, Jul 27, 16 @ 3:18 pm:

    perhaps they should discuss ways to fund it, and stop trying to find ways to skip out on what is owed.

    pay the piper stip trying to rip off tax paying state employees

  44. - Cassandra - Wednesday, Jul 27, 16 @ 3:42 pm:

    I have to say JB13 resonates with me. Politicians are always willing to take the money but how many of them are willing to come out from behind the tree and advocate for a massive tax increase. And massive it will be if all the needs expressed here and in many other media were to be met.

    I’m talking about both parties here. Not just the evil mogul.

  45. - Ron - Wednesday, Jul 27, 16 @ 4:42 pm:

    Those most ripped off are the non state employee taxpayers.

  46. - Arthur Andersen - Wednesday, Jul 27, 16 @ 5:13 pm:

    PS: Another data point; NYC Retirement Systems announced their returns today for FY 16. 1.6%.

  47. - City Zen - Wednesday, Jul 27, 16 @ 5:16 pm:

    ==Actually, because Illinois’ income tax is regressive…Now, what’s the top rate in say, California…?

    The top rate for retirement income in California is 13.3%. Illinois is 0%. You’re right, Illinois is regressive.

  48. - Arthur Andersen - Wednesday, Jul 27, 16 @ 7:25 pm:

    Whoops. My prior post didn’t post.

    I see your point now, Professor Colombo. My concern with any scenario that reduces State pension contributions while the funded ratio is still so low is that the “three-legged stool” of DB funding can never be achieved. That being 20% funding from members, 20% from employers, and 60% from investment returns (long-term.) I appreciate your insights and positive contributions on this topic.

    Thanks to Chicagonk for clarifying Toure’s point. I haven’t calculated it myself, but there probably are periods when a 100% S&P index fund would outperform a diversified portfolio. That choice is also considerably more risky. Yes, I’ve heard the Warren Buffett argument, but consider that Buffett essentially runs a very large private equity company.
    I don’t know how to respond to assertions about “too many hedge funds” or “fees too high” without any documentation.

  49. - Arthur Andersen - Wednesday, Jul 27, 16 @ 10:15 pm:

    This is a test-having device problems.

  50. - Lost in the weeds - Wednesday, Jul 27, 16 @ 11:08 pm:

    So what. Returns are lower for pensions. If one has a 401 K they make the same or worse investments and earn less than pensions which is a proven fact.

    So I am wondering what is wrong with pensions versus the alternative which is to work longer. And if Social Security is cut more then work even longer to make an adequate income.

    Social Security and Pensions will not be there, as I have heard younger persons say, makes me wonder if they will be saving 20 percent of their income or just plan to work forever.

    What jobs are going to be available to do that? What is it that someone will have a job producing that will provide current income and retirement if robots and computers take many jobs away?

    Producing Pokeman Go games and cellphones will produce what benefit that will support someone’s income for life and some kind of retirement?

    All the big gains in comfort and productivity occurred by 1970. How we transition to an economy where less work is required to maintain or slowly improve living standards and provide adequate income and living standards for the population seems not to be a consideration in the minds of those whose focus is to reduce taxes, pensions and social programs.

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