The next market decline will trigger a crisis. Even without chasing high beta portfolios and other risky investments, the portfolios pose huge risk to taxpayers and retirees.
The private sector separates the growth (working years) and income (retiree years) parts of retirement assets. If you want a lifetime income guarantee, you can purchase an annuity product. The portfolios supporting these products invest in relatively high grade corporate bonds. The market for these products is rather small in the US because most individuals do not like the relatively low long-term yields of these investments. Most individuals choose to manage their own portfolio during retirement without an income guarantee. The performance of the portfolio during the first few years is crucial for not outliving the portfolio.
The public DB industry comingles assets to support current workers and retirees. Some of the money is invested rather safely but the majority is invested aggressively. A market decline will hit the assets to support current retirees very hard. When a pension plan indicates that they need an average 8 percent return, they are talking about the entire portfolio to support both current workers and retirees. Realistically, the portfolio to support retirees should earn perhaps 5 to 6 percent on relatively safe investments. A market decline will put the earnings on the retiree part of the portfolio perhaps underwater. More troubling, the retiree part of the portfolio is growing rapidly while the current worker part of the portfolio is growing very slowly if at all (due to worker reductions).
Pension agencies are recklessly managing assets to provide the illusion that the benefits can be obtained without much risk to taxpayers. The private sector cannot manage retirement assets in this manner if required to guarantee income streams at retirement.
I agreee with you, and I have always believed that how much a portfolio pays in secure dividends is more relevent to a person than how much it is worth on any given day.