Investment earnings make up around 60 percent of pension benefits. Over the past three decades, state and local pension plans have changed their investment strategies in attempt to boost investment returns. Plans originally invested in fixed-income bonds, but beginning in the 1980s and 1990s, began increasing their investments in stock and equities. In the past decade, plans have increased alternative investments such as private equity, hedge funds, real estate, and commodities.
The Urban Institute created an interactive grading tool assessing each state retirement plan. States are graded on seven key criteria: rewarding younger workers, promoting a dynamic workforce, encouraging work at older ages, providing retirement income to short-term employees, providing retirement income to long-term employees, making required contributions, and funding ratio.
