In all of your examples, you’re ignoring dividends and fixed income returns on bonds that were purchased before ZIRP. If you bought a 10-year Note in 2000, you would have earned ~6.5%. Someone who was retiring in 2000 should have had a healthy bond portfolio with a fairly large mix of long-term and short-term Treasuries in addition to municipal bonds and some GSEs, etc. If they were overweight bonds in 2000 — which they should have been if they were retiring — they should easily have earned 5-7% over the past 12 years.
In hindsight treasuries where a good deal from 1995-2000. The 30 year was 6-8%. Today, not so much, 2.5%. Inflation will be harsh at the end of the 30 year term. And comparitively, the Dow is up somewhere between 10% and 250% depending on when in 1990-2000 you would have bought.[/quote]
Of course, deflation might be an even bigger problem over the next 30 years.
The point is that the pension plans are not being technically irresponsible when they use 7-8% return assumptions. The question is whether or not the next 50 years will look like the last 50 years (I think not).
There are a number of rather painless ways we can fix both the pension and Social Security problems, but the lies, hyperbole, and vitriol are making things more difficult. It would be helpful if people had a better understanding of both sides, and if people could stop using envy as justification for breaching contracts.
We ALL have to pay for things we don’t like or agree with, both in the public and private sectors (and no, we don’t necessarily have more choices or options just because an entity is “private”). I don’t get to make millions for running around and throwing balls or for acting in TV shows, but I DO have to pay for it when I buy products that advertise (even if I never watch TV, see a game, etc.). I don’t get to make the income or have the benefits that executives, some employees, and some investors get, but I DO have to pay for it when I buy the products my family needs to survive and thrive. Employees DO have to pay for it when their wages/benefits are cut or remain stagnant, but the compensation packages for upper management keep going up…or when investors are rewarded instead of the employees who create the value in the first place.
That’s why the argument, “I don’t get it why should they,” or, “I don’t get it, why should I have to pay for someone else to get it,” tends to fall on its face. Lots of people get what we don’t get, and we ALL have to pay for it, one way or another.
