How is Your 401k Doing?
Is it meeting its stated goals? Do you feel like your retirement plans are going well? Or are you deciding you have to work a few more years than you planned to?
http://www.nasra.org/resources/InvReturnAssumption_Final.pdf Some members of the media, academics, and policymakers recently have questioned whether public pension fund investment return assumptions are unrealistically high. If this were true, it could encourage these funds to take too much risk in investing pension fund assets, or it could understate the cost of pension liabilities, reducing their current cost at the expense of future taxpayers. Alternatively, an investment return assumption that is set too low would result in overstating liabilities, which would overcharge current taxpayers. Public retirement systems employ a process for setting and reviewing their actuarial assumptions, including the expected rate of investment return. Most systems review these assumptions regularly, pursuant to statute or system policy. The process for establishing and reviewing the investment return assumption involves consideration of various factors, including financial, economic, and market data. This process also is based on a very long‐term view, typically 30 to 50 years. Although public pension funds, along with most other investors, have experienced sub‐par returns over the past decade, median public pension fund returns over longer periods exceed the assumed rates used by most plans. As shown in Figure 1, median investment returns for the 20‐ and 25‐year periods ended 12/31/09 exceed the most‐used investment return assumption of 8.0 percent. For example, for the 25‐year period ended 12/31/09, the median investment return was 9.25 percent.