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]

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]

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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[NanoSour]

2.95% real based on "Cautious" spending using ESPlanner Monte Carlo. AA of 55/35/10.

 

[photoguy]

For what purpose am I making this guess?

Without making an estimate of your expected returns, how do you know if your AA can meet your long term goals?

 

[papadad111]

80/20 asset allocation. The 20% is mostly cash not bonds. On this AA I assume annual 5.25% return. Inflation is set at 2.75% thus

a real return of 2.5%.

 

[papadad111]

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

Wow. That's sobering.

What withdraw rate and how long does the portfolio last at just 1 percent real return?

 

[diehard1997]

My AA is 65/30/5 (lazy portfolio) and I plan using a 2% real return. I'd rather be pleasantly surprised with a good return year!


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