June 29, 2012

Unfunded Pension Liability

I was thnking today how I read the actuary for the City of Worcester calculates the funding based on a 8% return. The S & P return the past ten years, I read recently was something like 3%. Bottom line 8% expected return used by the actuary seems overly aggressive especially when we read this week that we had a negative return this past year.


Jahn said...

Over the loooong, loooong, looooong run (meaning decades) one can expect about 8% return from the stock market, but I think what we have to keep in mind is that the city is somewhat limited in how aggressive they can be with pension funds investing so the end result is they tend to invest in more Consv. stocks and also in bonds. Now these conservative investments will lower the above 8% figure to more like 6-7 %.

Basic rule of thumb is the more conservative the investemnt the less the expected ROR will be, conversely the more aggeressive the inv. the greater the expected return. Once again this is over decades of historical rates of return.

Anyone who wants a return on average of 22.9% should think about buying into Buffets companies. Thats right on average since 1951.........thats a 60 yr run/history..... Buffet has realized 22.9%.

Long story short the city is screwed w/its unfunded pension liabilty. City got lucky yesterday and Obummer-care years from now may bail out the citys unfunded medical ins. liabilty for retired and soon to be retired 'eees.

Time to put all gubmint 'eees into 403b's, into the state Workmens comp pool, and if an empolyees wants disabilty ins they pay for it 100%. This is what the poor slobs in the private sector have to do

And please no one tell me it's for the Firemen or the cops or the teachers or whoever. There is absolutely no reason gubmint 'eees sholdnt be teated like private 'eees who work day in and day out to hand over generous bennies to people just b/c they work for the gubmint.

So.............did anyone notice how the aSSESSORS OFFICE AND THE TREASURES OFFICE WERE NOT OPEN LATE last Tuesday on tax due day? Customer service??

Everyone have a safe 4th JUly.

jose said...

i feel no sympathy. i am 27, and if theres one thing i've learned is that you cant depend on anyone to take care of you but yourself. the world is going bankrupt trying to pay public union salaries, pensions, perks, ect, but yet any talk of reform is a sin. looks the the water well is bone dry.