WRS News Online

 


Robert Conlin

Message From Leadership

Helping Your Future Self
by Robert Conlin, ETF Secretary

When I started my service with the State nearly 25 years ago, I was fortunate to have a grizzled, experienced colleague as a sort of mentor to show me the tricks of the trade. "Dan" shared advice and insights gleaned from years of doing the job that helped this newbie avoid many a painful or embarrassing mistake and made me a better and more valuable employee. Interestingly, I think, the best advice he gave me had nothing to do with the job and everything to do with my future wellbeing.

Shortly after I started my job, as I was sifting through the piles of "new employee" information trying to decide what benefits to enroll in, Dan popped his head in my door and said, "Save early. Save often." Now, Dan had a reputation of being the consummate deal hound and I thought this was an announcement of his latest "3-for-1" sale discovery or discount tech gadget find. Instead, he was encouraging me to think about my financial future. "The WRS is a good benefit, but don't make the mistake of thinking it's all you'll need. Save something extra. You won't miss it much now and you'll really appreciate it in the future."

That was, and still is, good advice. The WRS pension, when combined with Social Security, was designed to replace 60% to 85% of a full career employee's pre-retirement gross earnings. And given that the WRS does not have a guaranteed cost-of-living adjustment and that any post-retirement adjustments can be rescinded, having some additional resources on hand in retirement makes good sense.

Whether you choose to save during your career by investing in the tax-sheltered Wisconsin Deferred Compensation Program, by making additional contributions to your WRS account, or by saving in some other manner, having additional resources to draw on in retirement for life's contingencies may give you some peace of mind. And if you're already retired, finding a way to set aside some of the increases you've received since retirement may help to cushion the blow when the next financial crisis strikes.

Dan passed away not too long ago. While he is missed, his sage advice lives on.


Michael Williamson

Looking Back at 2016 and Forward to 2017
by Michael Williamson, SWIB Executive Director

The start of a new year is always exciting. The change of the calendar from December to January gives us the opportunity to look back at and celebrate our successes from the past year. It is also a time to identify opportunities for the new year that lies ahead. As investors, we are no different than many of you as we usher in the new year. We take a step back and look at the past year's performance, while looking forward to identify opportunities and potential challenges the new year may present.

The preliminary returns for the Core Fund and Variable Fund in 2016 were respectable, given the ups and downs the financial markets experienced. The Core Fund finished 2016 with a preliminary return of 8.5% and the Variable Fund finished the year with a preliminary return of 10.6%. I am proud of the fact that the Core Fund has beaten its one, three-, five-, and ten-year benchmarks. Similarly, the Variable Fund has beaten it benchmarks in all four time periods.

In 2016, we saw a continuation of the ups and downs that have defined the financial markets since 2008 and the Great Recession. We went from a point last January, where stocks hit their lowest levels since 2014, to one point last summer where all three major U.S. indexes reached record highs. The celebration was short lived, as stocks dropped again in September before bouncing back after the November election to close out the year. We watched as the Wisconsin Retirement System Trust Funds fell into negative territory before rebounding to post solid year-end results.

Because of this volatility in the financial markets, and our expectations that it will continue through 2017, we have changed the way we look at risk. Since you, our members, share in the investment risk, along with our employers, we have taken a conservative position that generates respectable returns but also adds protection. We are investing the trust funds, first and foremost, to protect the pensions of retirees from another major reduction and increased contribution rates for active employees, then to generate reasonable returns. We are able to implement a strategy that is balanced across more diverse asset classes than many of our fellow pension plans, which are concentrated in fewer asset classes. This strategy makes us more resilient to a greater number of market environments, like we saw in 2016. We are able to implement this strategy because the Wisconsin Retirement System, unlike many public pension systems across the country, is fully funded, which means we do not have to take unnecessary risk with your pension money to keep it financially strong.

As we look toward 2017, we expect the current "low return environment" will persist. But we are confident that the disciplined, prudent and innovative strategy we have put in place will continue to protect the trust funds from market declines while generating solid returns. We may sacrifice a little upside when the markets are high, but we have built in more down-side protection to insulate you from the volatility the financial markets might experience. You can rest assured that we will continue to work hard to remain the strong, steady economic pillar you have come to trust.