CalPERS Cuts Retirees Pension by 60% During Their Retirement

Paul K. Dunn
May 17, 2017
2 min read

CalPERS is underfunded and unrealistic. Can it save itself?

Original Article Written by: Ed Ring / January 28th 2016

If you think the stock market's steep slide this month hammered your personal portfolio or 401(k), imagine what it's done to California's state pension system (CalPERS). Years of over-optimistic stock purchases and inadequate contributions have left it terribly vulnerable, and just a few years of down markets could leave it insolvent (unable to pay debts owed).

Financial statements released last month (for the fiscal year ending June 30, 2015) showed that the pension system was only 77% funded — and that percentage has certainly dropped alongside all the stock indices in recent weeks. If taxpayers are going to avoid having to bail out CalPERS, the system needs an overhaul.

CalPERS actuaries rely on earning a 7.5% annual return on investment to meet the current and future pension obligations to 1.8 million participants. But current stock market conditions make achieving that goal much harder — if not impossible — over the next several years. And that will leave taxpayers on the hook for billions.

How much taxpayers contribute to the pension fund each year is determined by two factors: how much CalPERS owes in current and future benefits, and how much it expects to earn on its investments. If expected earnings are high, the hundreds of public agencies and school districts contribute less money up front. But later, when those mythical 7.5% returns don't materialize, taxpayers are left to make up the shortfall.

Contact us IMMEDIATELY, If your pension is with CalPERS and you would like more information on an alternative solution to protect your retirement.