Tuesday, January 06, 2009

State Retirees Doing Just Fine, Thank You!

Bruce Murphy, no stranger to pension plans, shines a light into the darkness.

...Wisconsin’s massive retirement fund – the 10th-largest public fund in the country – has performed marvelously (averaging an annual return of 7.8 percent) and has regularly increased payments to retirees at a rate faster than inflation. Most retirees (79 percent) are in the “Core Fund,” which guarantees the payments they get will never go below the amount promised when they retire. In addition, this fund provides “dividends” to retirees based on the market returns of the investment and smoothed out over five years. From 1982 (when the pension system was created) through 2007, the dividends boosted annual payments to retirees by an incredible 370 percent, when you multiply the annual increases contained in state figures over this period of time. This compares to the increase in inflation of 112 percent over this time. (Depending on what year someone retired during this period, they may have done less well or better in their return than the cumulative increase over this 25 year period.)

Few, if any, states make such generous adjustments

There are actually two different fund options, but the other one (variable) is almost as generous as the "core" fund. And no State retiree is allowed to place more than half of their pension funding into the "variable" fund, anyway.

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