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What do you use as estimate (guess) regarding future rate of return?
Old 03-23-2015, 04:24 PM   #1
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What do you use as estimate (guess) regarding future rate of return?

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?
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Old 03-23-2015, 04:32 PM   #2
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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.
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Old 03-23-2015, 04:42 PM   #3
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All my projections have always used a 1% real return. So far, I've been happily surprised every year.
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Old 03-23-2015, 04:43 PM   #4
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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.
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Old 03-23-2015, 04:45 PM   #5
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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.
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Old 03-23-2015, 04:50 PM   #6
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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.
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Old 03-23-2015, 04:52 PM   #7
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I use 6% nominal but only withdraw MRDs.
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Old 03-23-2015, 04:54 PM   #8
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For what purpose am I making this guess?
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Old 03-23-2015, 05:00 PM   #9
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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.
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Old 03-23-2015, 05:02 PM   #10
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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.

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Old 03-23-2015, 07:09 PM   #11
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Another 5% nominal. Both Quicken and Vanguard project my portfolio allocation historical returns at 8% yea right. 65% equities, 25% bonds, 10% cash.
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Old 03-23-2015, 07:21 PM   #12
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~3% since I'm reasonably sure I can get it for a low risk planning basis.
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Old 03-23-2015, 07:26 PM   #13
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8% nominal...

It's just a guess. For the last 10 years I've gotten 10.5% so I have been pleasantly surprised.
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Old 03-23-2015, 07:36 PM   #14
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5.3% nominal, 2.3% real
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Old 03-23-2015, 07:59 PM   #15
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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.
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Old 03-23-2015, 08:31 PM   #16
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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......
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Old 03-23-2015, 08:51 PM   #17
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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.
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Old 03-23-2015, 09:20 PM   #18
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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.
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Old 03-23-2015, 09:58 PM   #19
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I don't make projections anymore.

When I first retired I probably used around 2%.
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Old 03-23-2015, 10:19 PM   #20
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6 nominal and 3 real. Both have proved stupidly low. My kids should enjoy.

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