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Response to TexasTowelie (Original post)

Thu Aug 9, 2018, 05:02 AM

1. The biggest problem is the assumption

Plans are assuming rates of return up to 9 % per year.

Then they put in rules like 60 % of the money has to be invested in bonds. Then you have an interest rate environment like we've had the last few year where a 30 year bond is paying 4 % interest and you see how crazy a 9 % expected return is.

The DJIA first went over 1,000 in 1976. It finished 1981 at 875.

In the year 2000 the market hit 10,700. It finished 2009 at 10,400.

It's just notreasonable to expect big returns from the stock market. Sometimes it does great, but it also has long periods of stagnation, and it also has the occasional huge drop. For a pension fund it's even worse when you have to take money out during those drops or stgnant periods. It's silly blaming stock mrtket drops for the shortfall. For whatever reason, those drops are going to happen and need to be planned for in your calculations.

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