Guide

What rate of return
should you actually assume?

It is the single most important number in any projection, and the easiest one to get wrong in an expensive direction.

Published August 15, 2026 · 7 min read

Key takeaways

The last decade returned far more than the long-run average. Using it as a forecast will mislead you.
Roughly 10% per year is the long-run historical average for U.S. stocks before inflation.
Many planners use 6% to 7% for long-horizon planning, which builds in a margin of safety.
Assuming a lower rate than you get is a recoverable mistake. Assuming a higher one is not.

Why this is the most important input

Change your starting balance by 10% and your projection moves by 10%. Change your assumed rate of return by two percentage points and your thirty-year projection can move by 70% or more. Everything else in a compounding calculation is rounding error by comparison.

Which makes it worth being careful, and slightly pessimistic, about the number you choose.

What the last decade actually returned

Trailing ten-year annualized total returns as of mid-2026, dividends reinvested:

Fund	Asset class	10-year return
QQQM / QQQ	Nasdaq-100	~22.1%
FTEC	US tech sector	~21.9%
VUG	US large growth	~17.9%
VOO	S&P 500	~15.5%
VTI	US total market	~15.0%
SCHD	US dividend	~13.0%
VXUS	International	~9.4%
VNQ	US REITs	~5.5%
BND	US bonds	~1.6%

Every U.S. equity number in that table is well above the long-run historical average. That is the point worth sitting with.

The long-run numbers

Measured over roughly a century, U.S. stocks have returned about 10% per year on average before inflation, or somewhere near 7% after it. That average contains the Great Depression, the 1970s, 2000 to 2002, and 2008 — long stretches where the average was nowhere in sight.

The past decade ran hot for identifiable reasons: an extended period of low interest rates, and enormous gains concentrated in a handful of very large technology companies. Neither is guaranteed to repeat.

Run these numbers yourself

Every figure on this page came from the calculator. Change the inputs to match your own situation and watch what moves.

Open the calculator

What the difference looks like in dollars

$10,000 to start, $500 a month, 30 years:

Assumed rate	Final balance	vs. 7%
5%	$450,900	−32%
7%	$660,800	—
10%	$1,205,900	+82%
15%	$3,445,400	+421%

The 15% row is roughly what the last decade of the S&P 500 would suggest. If you plan around it and get 7% instead, you arrive at retirement with under a fifth of what you expected. That is not a rounding error, it is a different life.

Reasonable numbers to use

6% to 7% — a common choice for long-horizon retirement planning in a stock-heavy portfolio. Conservative enough that reality is more likely to surprise you upward.
4% to 5% — reasonable for a balanced portfolio with a meaningful bond allocation.
8% to 10% — defensible for a very long horizon in an all-equity portfolio, but leaves you no cushion.
Above 12% — not a planning assumption. That is a hope.

If you want a real-terms answer, subtract two to three percentage points for inflation. A 7% nominal return with 2.5% inflation is about 4.5% in actual purchasing power.

The asymmetry that should decide it for you

Assume 5% and earn 9%: you retire with far more than you planned. A pleasant problem.

Assume 12% and earn 7%: you reach 65 with a fraction of what you needed, and no time left to fix it.

Those two errors are not symmetric, and the assumption you choose should reflect that.

What no rate assumption can capture

A constant rate is a smooth line. Real returns are jagged, and the sequence matters. Two portfolios with identical average returns can end in very different places depending on whether the bad years came early or late — especially once you are withdrawing money.

This is why the calculator on this site shows a range around the expected path rather than a single line. The range is the honest part.