STRS Investment Return vs Treasury Bill Return

From Mario Iacone, May 12, 2009

IMPORTANT FACT/ESTIMATE: TABLE ONE shows at least what 2009 STRS assets would be if the 1998 asset value would have been invested in low and no risk investments averaging Five Percent.

TABLE TWO lists Treasury Bill rates since 1998 showing that at least a 5% Return would have been easily attainable over the period of time shown in TABLE ONE.

Click image to enlarge.

No doubt, it will be pointed out that stock market investments will do much better and probably average 10% over the long term, and that return might be attainable, although such is not true for the period of 1998 to 2009.

However, there is a serious flaw in such Long Term

projections. Large Short Term losses cause serious financial hardship for both the active and retired members of STRS.

The current situation best illustrates that point. Due to large short term losses, STRS members are confronted with:

• Increases in Contributions.
• Higher Retirement Age.
• Worse Final Average Salary.
• Reduction/Elimination of COLA.
• Worse yet, we are paying high salaries and b onuses to get that.

Will it matter to those that suffer those cuts, if in 2024, STRS can show an average return of 10% on their investments?

STRS should note that it is NOT a Wall Street Bank or Wall Street Investment Firm, but a RETIREMENT SYSTEM.

STRS must implement an investment strategy that offsets huge short term losses to avoid a repeat of the same problem a short time into the future.

Live link from Table 2: www.federalreserve.gov/releases/h15/data.htm