What Rate of Return Do You Need?

Retirement Plan Photo

What Returns Are You Planning For?

Reviewing your long term plan can alleviate some fear

As we are all experiencing the wild swings in the stock market it is important to stay focused on your long-term goals and not get caught up in the day to day headlines.  This is the best time to revisit your financial plan.  Although the market at the close of business on Wednesday March 11 was down over 15% year to date did you know the 5 year rate of return is up over 30%? Another aspect to consider is what rate of return you need from your investments in order to achieve your financial goals.  When planning for your retirement it is important to use historical long-term rates of return. When using these benchmarks many people may come to realize that the returns, they have been experiencing are exceeding what is required for them to have a fully funded retirement.  These two weeks will have very little impact on your overall retirement.


What effect does a bull or bear market have on the likelihood that you will be able to retire the way you want?  What does this market volatility mean for your situation? The way to truly understand that is to look at the assumed rate of return you are using for your accounts in your financial plan.  Using sample client information the picture below shows how we can assume a rate of return for each one of your accounts.

By using rates of return based on the historical averages of your investments we can see what the probability is that the money you have saved will last throughout your retirement.  We can also see what an up market, flat market and down market would do to the probability of your money lasting throughout your retirement.

Now is a great time to pull your plan back out and review it, ask questions about the rates of return you are assuming in the report, and remember to not panic over day to day swings in the market.


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