Predicting the future on retirement systems | Arkansas Blog

Tuesday, October 25, 2011

Predicting the future on retirement systems

Posted By on Tue, Oct 25, 2011 at 9:30 AM

I was interested to read today that the Arkansas Teacher Retirement System will stick with an expectation of 8 percent annual return on investments in figuring soundness of the system.

Sounds pretty optimistic to me given the last decade, Check out this handy calculator of performance of the S&P 500 (stocks).

It shows the return for the 10 years ending Dec. 31, 2010 at a whopping .31 percent (that's less than 1 percent) compound annual growth rate. But reach back farther and things look better.

20 years — 8.5 percent
30 years — 11.39
40 years — 10
50 years — 9.56

Still, the trend for the last 30 years is downward. What's the new normal? Who knows? And these are just stock figures. Bond returns are a bit lower, 7.4 percent over 20 years according to the Barclays Index.

Of course, poor returns are offset somewhat in the short run by lack of inflation in salaries. No pay increases at all for some state employees the last two years. Certainly not 3.25 percent (the new, reduced assumption in the retirement system calculations, down from 4) plugged into the teacher formula yesterday.

Want a peek of the apocalypse? Check the cratering of California government finances, as reported by Michael Lewis in this month's Vanity Fair. The implosion of the city of Vallejo on account of overblown fire and police pension obligations (based on the dogged belief in 8 percent returns) is instructive, as are California prison costs, greater now annually than the amount spent in California on what was once the nation's premier system of higher education.

Tags: , , ,

Sign up for the Daily Update email


Showing 1-1 of 1

Add a comment

Subscribe to this thread:
Showing 1-1 of 1

Add a comment

More by Max Brantley

  • The Mondo Trumpe open line

    A world of the dogs? Check out Trump's latest poll ratings.
    • Jul 22, 2018
  • University pay ranking puts UA System chief at 57

    The Chronicle of Higher Education recently released its survey of pay of top public and private university leaders in 2016-17. Donald Bobbitt, president of the University of Arkansas System, checked in at No. 57 on the list of 251 public university leaders.
    • Jul 22, 2018
  • Winds, race and an open line

    The open line includes power outages, Republicans and racism.
    • Jul 21, 2018
  • More »

Readers also liked…

Most Viewed

Most Recent Comments

  • Re: The Mondo Trumpe open line

    • Vanessa, the video of the beatdown is only the beginning. The asshat was there with…

    • on July 22, 2018
  • Re: The Mondo Trumpe open line

    • Trump is Trash.

    • on July 22, 2018
  • Re: The Mondo Trumpe open line

    • When a political party or politician has to constantly & repeatedly insist to it's citizens…

    • on July 22, 2018



© 2018 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation