In June of 2012, Calpers lowered the expected rate of return on its portfolio to 7.5% from 7.75%.

WSJ: Andy Kessler: The Pension Rate-of-Return Fantasy

But if you could build a portfolio where half of the expected return is cash dividends, to which you could depend on buybacks and debt pay downs of another 150 basis points, we now have a 6% yield.

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Actuaries guess, er, compute how much money is needed today based on life expectancies of retirees as well as the expected investment return on the pension portfolio.

WSJ: Andy Kessler: The Pension Rate-of-Return Fantasy

Understand your current portfolio, i.e. what is the expected return, what is the level of risk and what is the level of diversification.

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