In this section, we try to isolate the eﬀects of various ﬁnancial factors on the Fund’s longevity. We consider the Fund “dead” when its net assets reach zero. The factors considered are investment returns, expenses and cuts to beneﬁts. All other current trends are kept the same. Table 4 shows the results.
|Assumption||Year the Fund Dies|
|Investments return 7.5%||2033|
|Investments return 8.5%||2036|
|Investments return 9.5%||2037|
|25% Beneﬁt Reduction||2041|
As you can see, beneﬁt cuts provide the greatest improvement. Expense reduction, while important, does not provide the improvements most of us hope for. As you can see, using an (obviously hypothetical) expense of zero adds surprisingly little to the Fund’s longevity. Beneﬁt cuts provide the greatest improvement. Of course, in a real scenario, more than one factor will come into play. The point here is to see which ones give us the most “bang”.
You can ﬁnd charts for each of these scenarios in the appendix on page 88.