US pension funds are slashing their forecasts…and some don’t even think they’ll meet those
US public pensionfunds are cutting their expectations for investment returns over the next 30 years or more, but some do not expect to meet even the new targets over the coming decade.
After a long period of low interest rates, forecasts by investment analysts show the next 10 years will probably bring slower market growth, leading to reduced expectations for the $3.7 trillion of public pension assets.
But public pensions are wary of lowering their expected return rates, or the discount rate, too quickly because doing so would drastically increase costs for state and local governments and their employees, whose contributions form the funds.
Instead, the funds say they plan to make up for lower returns expected in the coming decade over the next 30 years or more.
“Pension funds are in an extraordinarily difficult political situation,” said Don Boyd, fiscal studies director at the Rockefeller Institute of Government.
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