In 2016, U.S. stocks posted their best gains since 2013, with the Dow Jones Industrial Average up 13.4 percent for the year. While a strong stock market is good news for pension funds, which rely on investment earnings for the majority of their revenue, storm clouds are on the horizon for many retirement systems.
Pension plans are still recovering from the enormous losses suffered in the wake of the Great Recession. According to the Federal Reserve, state and local pension fund asset values fell from $3.2 trillion at the end of 2007 to $2.1 trillion in March 2009, increasing pension costs at a time when state and local governments faced severe losses in revenue. More recently, the California Public Employees Retirement System (Calpers), the country’s largest public pension fund, announced in December 2016, that it was lowering expectations for future investment returns.
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