While Americans are typically earning less than 1 percent interest on their savings accounts and watching their 401(k) balances yo-yo along with the stock market, most public pension funds are still betting they will earn annual returns of 7 to 8 percent over the long haul….


In New York, the city’s chief actuary, Robert North, has proposed lowering the assumed rate of return for the city’s five pension funds to 7 percent from 8 percent…. But that change would mean finding an additional $1.9 billion for the pension system every year….

…to many observers, even 7 percent is too high in today’s market conditions.

“The actuary is supposedly going to lower the assumed reinvestment rate from an absolutely hysterical, laughable 8 percent to a totally indefensible 7 or 7.5 percent,” Mr. Bloomberg said during a trip to Albany in late February. “If I can give you one piece of financial advice: If somebody offers you a guaranteed 7 percent on your money for the rest of your life, you take it and just make sure the guy’s name is not Madoff.”

4 is not 2.

35 is not 2.

Also, and by the same token, 8 is not 7.

The typical public pension plan assumes its investments will earn average annual returns of 8 percent over the long termm…. Actual experience since 2000 has been much less, 5.7 percent over the last 10 years….
Public Pensions Faulted for Bets on Rosy Returns
Published: May 27, 2012

8 is not 5.7, either.