What do you use as estimate (guess) regarding future rate of return?

[palomalou]

I have read a few people on this board who say they use 0-2%. Is that what most of you do, and if not, what do you estimate and why?

[robnplunder]

Quote:

Originally Posted by palomalou I have read a few people on this board who say they use 0-2%. Is that what most of you do, and if not, what do you estimate and why?

I use 6% (nominal) based on 10 year (or life time if longer) average performance of all my mutual funds. It's actually closer to 7% but I rounded it down 6. It's less than historic S&P 500 return but I have some bond funds in my mix.

[braumeister]

All my projections have always used a 1% real return. So far, I've been happily surprised every year.

[Meadbh]

I use 5% nominal, 2% real return, because it is a conservative estimate of past returns on a balanced portfolio, and lower returns are likely in the future.

[timo2]

I round down based upon the past year or two of a particular investment. so 1 to 2 percent range is where I'm at right now.

[MRG]

Meadbh, thank you. That's what I was wondering about nominal vs. real. May help me understand if we're all talking about the same number.

[Brat]

I use 6% nominal but only withdraw MRDs.

[Big_Hitter]

For what purpose am I making this guess?

[RetireAge50]

6% real is what I expect (based on history) but plan for and will survive on 0% real or less. Will adjust income every month based on actual returns.

[ERD50]

I don't use any 'number' - a single number does not include the volatility of markets and inflation, and the timing of pensions and SS.

I do use the historical reporters, like FIRECalc, to better understand how my portfolio would have done in past real-world conditions.

-ERD50

[grasshopper]

Another 5% nominal. Both Quicken and Vanguard project my portfolio allocation historical returns at 8% yea right. 65% equities, 25% bonds, 10% cash.

[Car-Guy]

~3% since I'm reasonably sure I can get it for a low risk planning basis.

[ikubak]

8% nominal...

It's just a guess. For the last 10 years I've gotten 10.5% so I have been pleasantly surprised.

[Theseus]

5.3% nominal, 2.3% real

[RetireAge50]

All these numbers are not meaningful unless the asset allocation is known and whether one is stating what they actually expect to happen or if they are just using a safe return.

[Corporateburnout]

Quote:

Originally Posted by RetireAge50 All these numbers are not meaningful unless the asset allocation is known and whether one is stating what they actually expect to happen or if they are just using a safe return.

+1 on asset allocation

I plan on 5% nominal on a 50/40/10 AA with Fido and Vanguard estimates are in the 7.5% to 8% range.

If their estimates are true the kids will be ecstatic......

[calmloki]

In Quicken 2006 retirement planner I use 3.5% inflation, 5% return before retirement (that ship has taxied out of the station) and 4% return after. Those numbers are pulled from a dark and nether region and prove conclusively that she goes broke before the end of her long, long life. Sorry dear.

[pb4uski]

For my deterministic projections (in QLP) I use 5.5% nominal and 2.5% real. As I recall the historical return of a 60/40 portfolio is about 8.9% so the 5.5% that I use includes a significant haircut to the historical rate.

[audreyh1]

I don't make projections anymore.

When I first retired I probably used around 2%.

[GravitySucks]

6 nominal and 3 real. Both have proved stupidly low. My kids should enjoy.

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