For many Americans, 2022’s tumultuous markets and rising inflation have added to their financial worry and stress. While LAGERS benefit payments are not impacted by market fluctuations, and retirees continue to receive cost of living adjustments (COLAs) to help guard against inflation, you may still be wondering if you will be able to continue to count on this security in the future.
Safeguarding our members’ financial future is LAGERS’ top priority, and despite a turbulent year, the LAGERS system was designed to weather all types of economic environments. In 2022, the system’s pre-funding rose to 96.5% funded.
LAGERS CIO, Brian Collett, adds that while the portfolio ended its fiscal year mostly flat with a -0.6% return, net of fees, the portfolio did well against its total policy benchmark. Collett notes, “The performance attests to LAGERS’ effective risk-aware investment strategy to ensure the plan achieves its long-term obligations to our membersand retirees.” LAGERS 5, 10, and 20 year returns are: 9.8%, 9.5%, and 8.3% respectively. He adds, “LAGERS’ team is continuously looking for attractive and unique opportunities to diversify the asset base to reduce overall risk and add to the return.”
To further ensure future security of the system, LAGERS undertook a full Actuarial Risk Analysis in 2022. This analysis evaluates “what if” scenarios to measure the effect of future adverse experience on the system. For example, the analysis looked at what would happen if the system remains in a low-growth, high inflation environment for an extended period of time. The results of the analysis confirmed that the
system will remain financially sound, even if the current economic conditions persist well into the future, and there were no recommended changes from LAGERS’ actuaries as a result of the analysis.
LAGERS believes the system’s strong plan design, well-diversified portfolio, and strategic long-term planning have and will continue to serve the system well, meaning retirees and their beneficiaries can continue to be confident in the security of their hard-earned retirement.