Anonymous
09/06/2025 12:32
Subject: What growth rate to use in retirement planning?
Anonymous wrote:What about a 10 or 15 year time period?Anonymous wrote:Anonymous wrote:I have always used 2% and then assumed zero inflation. That way I could see how much I would have as it related to today’s prices.
That is really low. A two percent real rate of return is awful and that has never happened over a 30 year time period with an 80/20 portfolio in the US. The historical percentile range from (inflation adjusted returns over 30 year time periods from 1870-2024) for an 80/20 portfolio is
Worst: 2.2%
5th: 3.5%
10th: 3.9%
Median: 5.7%
The lowest number that is reasonable to use for your return assumption is a 3.5% real rate of return (unless you have a significant percentage of your portfolio in bonds).
The range in inflation adjusted returns with a 15 year time period assuming a 60/40 portfolio.
Worst: -1.5%
5th: 0.3%
10th: 1.5%
Median: 5.5%
Anonymous
09/06/2025 11:22
Subject: What growth rate to use in retirement planning?
What about a 10 or 15 year time period?Anonymous wrote:Anonymous wrote:I have always used 2% and then assumed zero inflation. That way I could see how much I would have as it related to today’s prices.
That is really low. A two percent real rate of return is awful and that has never happened over a 30 year time period with an 80/20 portfolio in the US. The historical percentile range from (inflation adjusted returns over 30 year time periods from 1870-2024) for an 80/20 portfolio is
Worst: 2.2%
5th: 3.5%
10th: 3.9%
Median: 5.7%
The lowest number that is reasonable to use for your return assumption is a 3.5% real rate of return (unless you have a significant percentage of your portfolio in bonds).
Anonymous
09/06/2025 11:11
Subject: What growth rate to use in retirement planning?
Anonymous wrote:Anonymous wrote:I have always used 2% and then assumed zero inflation. That way I could see how much I would have as it related to today’s prices.
That is really low. A two percent real rate of return is awful and that has never happened over a 30 year time period with an 80/20 portfolio in the US. The historical percentile range from (inflation adjusted returns over 30 year time periods from 1870-2024) for an 80/20 portfolio is
Worst: 2.2%
5th: 3.5%
10th: 3.9%
Median: 5.7%
The lowest number that is reasonable to use for your return assumption is a 3.5% real rate of return (unless you have a significant percentage of your portfolio in bonds).
Except most people who retire at say 65 can’t expect to live 30 years.
There are numerous 15 year periods that averaged negative returns to only 1%.
1929-1954 (it took until 1954 to get back to 1929 levels), 1967-1982, 1999 -2014.
Anonymous
09/06/2025 11:02
Subject: What growth rate to use in retirement planning?
Anonymous wrote:Don’t people think 60%in stocks is high for someone retired? I mean they have a limited time horizon.
Perhaps if you have a hardy pension that is okay.
I'm retired (early) and that's basically our allocation. You can't win if you don't play. After years and years and years of overall solid returns in the market it makes little sense to just walk away completely. A 60 percent allocation isn't aggressive -- it's moderate.
Anonymous
09/06/2025 10:59
Subject: What growth rate to use in retirement planning?
Anonymous wrote:Don’t people think 60%in stocks is high for someone retired? I mean they have a limited time horizon.
Perhaps if you have a hardy pension that is okay.
60/40 is a very traditional allocation for retirement-- I think it was used in the Trinity/Bengen study that produced the 4% rule.
That said there's nothing magical about it-- you could pick something higher or lower depending on your needs/risk tolerance.
Anonymous
09/06/2025 10:56
Subject: What growth rate to use in retirement planning?
Don’t people think 60%in stocks is high for someone retired? I mean they have a limited time horizon.
Perhaps if you have a hardy pension that is okay.
Perhaps if you have a hardy pension that is okay.
Anonymous
09/06/2025 10:23
Subject: What growth rate to use in retirement planning?
Schwab prepared a financial plan for us last year. They projected 6.11 percent growth before inflation with our "moderate" portfolio of 60 percent stocks.
Anonymous
09/06/2025 09:57
Subject: What growth rate to use in retirement planning?
We use 3%
Anonymous
09/06/2025 09:53
Subject: What growth rate to use in retirement planning?
Anonymous wrote:My financial advisor used 6%, which I think is aggressive, and the picture looks very rosy. I am currently in 60% equity, but have a 10% in cash which I will be investing over the next few years gradually (proceeds from exercising options last year and this year), so that percentage will go up slightly. Just retired this year. Should I ask him to rerun the numbers at 5%?
Historical real returns over a 30 year time period with 60/40 portfolio are
5th: 3.1%
10th: 3.4%
Median: 5%
I think assuming a 4% real rate of return would be reasonable and conservative. This gives you some wiggle room if they market does worse than average, but even if you end up with a 10th or 5th percentile outcome, you won’t be eating cat food in retirement.
Anonymous
09/06/2025 09:43
Subject: What growth rate to use in retirement planning?
Anonymous wrote:I have always used 2% and then assumed zero inflation. That way I could see how much I would have as it related to today’s prices.
That is really low. A two percent real rate of return is awful and that has never happened over a 30 year time period with an 80/20 portfolio in the US. The historical percentile range from (inflation adjusted returns over 30 year time periods from 1870-2024) for an 80/20 portfolio is
Worst: 2.2%
5th: 3.5%
10th: 3.9%
Median: 5.7%
The lowest number that is reasonable to use for your return assumption is a 3.5% real rate of return (unless you have a significant percentage of your portfolio in bonds).
Anonymous
09/06/2025 08:39
Subject: What growth rate to use in retirement planning?
I have always used 2% and then assumed zero inflation. That way I could see how much I would have as it related to today’s prices.
Anonymous
09/06/2025 08:35
Subject: What growth rate to use in retirement planning?
I'm super conservative, and I use 4%. I remember too well the crash in 2008 where some people I knew who were nearing retirement lost almost everything.
The extra 1% or 2% on top of the 4% would just be gravy.
The extra 1% or 2% on top of the 4% would just be gravy.
Anonymous
09/06/2025 08:17
Subject: What growth rate to use in retirement planning?
Is it inflation adjusted growth? 5% net growth sounds reasonable
Anonymous
09/06/2025 07:55
Subject: What growth rate to use in retirement planning?
At 5% or 6% your money should still be growing faster than you can spend.
I'd cut the spending.
I find it aggressive, because you are only 60% in equities.
I'd cut the spending.
I find it aggressive, because you are only 60% in equities.
Anonymous
09/06/2025 07:27
Subject: What growth rate to use in retirement planning?
My financial advisor used 6%, which I think is aggressive, and the picture looks very rosy. I am currently in 60% equity, but have a 10% in cash which I will be investing over the next few years gradually (proceeds from exercising options last year and this year), so that percentage will go up slightly. Just retired this year. Should I ask him to rerun the numbers at 5%?