I would be curious to know what rate of return do you use for you post retirement investment portfolio projection?

It’s the time of the year that I meet with some investment professionals and consider my retirement plans, investments, estate planning, etc. I’ve noticed that many bigger firms (UBS, Merrill, etc) are being very pessimistic in their return projections for even growth balanced portfolios post retirement. Most have assumed overall rates of return below 3% after inflation adjustments. In my personal projections I am much more optimistic in my assumptions of around 6-7% after inflation.

What do you think: am I overly optimistic or are the financial planners overly pessimistic? Something in between? Something else entirely?

I’d love to hear your perspective.
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I think 3% after inflation is a pretty historic number.

May not be applicable these days because I’m sure that number was negative with the huge inflation in the 70s. Plus most of these outfits have traditionally moved to bonds which right now are returning ass. So it might be closer than you think over a lifetime following traditional rules.

I’d tend to be more conservative for retirement. Fools don’t need to be running out.
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Pessemistic.

People have been saying since 2012 that the market was going to make a correction.

People have been saying since 2016 that the market was going to make a huge correction.

Had you been conservative all these years, you'd have missed some HUGE gains.

Asset allocation is real though. Bonds currently carry little weight so it depends how you have your money divided. If you have decades to retirement, you should be mostly in equities (index/mutual funds for most).
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I've got money invested with Edward Jones and know they are a bunch of Clowns. If you can't get 20% returns consider yourself FAIL.
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What he's saying is these dudes are telling him to expect a 3% return rate over time. He's wondering if that is too conservative a projected rate.

If he's getting 3% he needs to knife a fool.
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Thanks that is helpful!

I agree with being conservative as well. I am about 10 years from retirement and I am fortunate that I will not need to touch any of these funds for at least another 10 years after that (effectively giving me about 20 years for more growth).
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That is my observation as well. They constantly predict doom and gloom and they will eventually be right. However, on the upside they seem to be wrong far more often than they are right.

I am definitely equity heavy right now. I struggle with bonds with our historically low rates knowing that they face value will drop when rates eventually rise. I need to rebalance soon but I am struggling with the idea of more bonds. I probably need to just do it.
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I hadn’t really considered knifing them but they do have me asking myself what value they really could bring to me. It sounds like you agree they are too conservative as well. I tend to be a bit conservative myself but these guys make me feel like an overly optimistic rube when we talk.

I may have to revisit the knifing option if I were to did they were Broncos fans. I am definitely thinking more and more that I should just part ways with them.
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Wait. Are you only getting 3% returns?

If you are, definitely knife that fool.
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If you're getting 3% return, heads needs to roll.

That's piss poor, IMHO.
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Fortunately no - I have been doing much better than that on my own. I have been closer to 10 percent overall average or 7-8 after inflation over many years. However, as I consider moving to a professional money manager, they all seem to think those types of returns are not sustainable over a long period of time (although that has been my experience for the past 25 years).
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Merrill will project about 3-4 but keep in mind as a retiree, they will want you strongly diversified and your risk tolerance lower. I enjoy a great relationship with my Merrill guy and they can give you a ton of options and looks as you get near to pulling the plug.
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I want to plan for surviving trouble, so I'm assuming (pre-inflation) a 7 percent return prior to retirement, and then after retirement a 5.5 percent return on IRA funds (which I'll tap last and thus have a longer time horizon) and a 3.5 percent return on other savings that will be tapped first. I recognize that this is very conservative, but I don't want to be 80 years old and hit a bump like we had last April where I lose 30 to 35 percent of my savings and get really stressed out.

However, I also agree with Peter about grimacing over bond returns. It really rankles me to accept a lower return over a long period of time just to avoid a shock risk. I wonder if my risk tolerance would keep me from doing it, but I also know that I should go with lower returns in exchange for lower risk.

One thing that I keep telling myself is that even if I retire at 65 I'll still have a 20 year time horizon or longer (I hope). So it points against being too conservative. I'll likely do some sort of risk ladder where the money that I'll need in 20 years will remain more aggressive.
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Makes sense.

I'd guess you won't achieve the same returns as you diversify out of stocks. So maybe don't knife them just yet.

But I would ask them their fee structure. If you don't like what you hear, a lot of outfits have target dated funds, you could do the math and split your current savings into the requisite funds.
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So I bought stocks after the market crashed from covid and have pretty much doubled my money. With a Biden administration and a Dem win in GA the capital gains tax is guaranteed to go up. It will probably double or more. Also the Dem win in GA will probably cause a sell off. That scenario along with the fact that I probably won't be able to duplicate that investment performance anytime soon gives me pause. So with all that I'm thinking about selling all my stocks before Jan. 1 2021. Which is like today.

Is that the right move or would it be a fuck up?
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