What Average Rate of Return Should You Use for Retirement?

Updated April 2026 with current BlackRock Capital Market Assumptions.

Most people pick a rate of return for their retirement projections and wonder if they got it right. It’s one of the most consequential numbers in your plan, shaping how much you need to save, when you can retire, and whether your portfolio can withstand market pressure.

Take a 60-year-old with $800,000 invested who withdraws $50,000 a year. At 5% annual returns, that portfolio lasts about 27 years. At 7%, it goes past 35. At 9%, it’s still growing after 40.

There’s no easy answer here, because it’s impossible to predict the future return on your savings and investments with precision. What you can do is make an assumption grounded in historical data and your asset allocation, then test that assumption across a range of scenarios. 

The goal is to choose a reasonable long-run average to plan around, knowing actual returns will swing above and below it. A year of 2% returns doesn’t mean the assumption is wrong.

How to Know What Rate of Return to Use

For most retirement portfolios, a realistic planning range for a rate of return sits between roughly 5-8% nominal. The right number for your plan depends on your asset allocation, your time horizon, and whether you’re still saving or already withdrawing. A stock-heavy portfolio with a 20-plus year runway might justify 7-9%. A more conservative allocation with a lot of bonds belongs closer to 4-6%.

If you’re actively drawing down accounts in retirement, the lower end of that range deserves more weight because bad timing hurts more when you’re spending than when you’re saving. A 65-year-old in retirement has far less time to recover from a rough stretch than someone in their 40s.

The reason is sequence-of-returns risk. A market slide in your first few years of retirement, when your balance is largest and every withdrawal cuts deeper, does far more damage than the same downturn 15 years in. Two retirees with the same 30-year average return can end up in very different places depending on when the losses fell.

That’s why a more conservative rate range often makes sense for the early withdrawal years in retirement, even if your long-term allocation leans toward stocks. There’s also a behavioral case for this: plans that come in better than projected are much easier to stick with.

Whatever rate you land on, it’s worth resisting the urge to adjust your rate of return after a strong year or a rough one. The number reflects your long-run allocation strategy, not recent performance.

Here’s how to figure out where you fit.

Nominal vs. real returns 

Your nominal rate is what your investments returned before inflation. Your real rate subtracts inflation to show purchasing power growth. The Boldin Planner takes nominal inputs and handles inflation on the cost side. That’s the framework this article uses, so every return figure below is nominal.

Historical averages as a baseline 

The S&P 500’s average return is about 10.6% yearly since the index launched in 1957. That reflects a 100% U.S. large-cap stock benchmark, not a diversified retirement portfolio. Most investors who are approaching retirement or actively retired have a mix of stocks, bonds, and cash, which generates lower but more stable returns.

What the data says right now 

The BlackRock Investment Institute maintains a dataset of capital market assumptions based on past data and current market conditions, estimating future returns across asset classes and scenarios over 5, 10, 15, 20, and 30-year horizons. Here are their February 2026 estimates in a standard scenario:

Asset Class	5-Year	10-Year	20-Year
US large cap equities	7.8%	7.7%	7.9%
Global large cap equities	7.9%	7.8%	7.9%
Global 60/40 portfolio	6.8%	6.7%	6.8%
US aggregate bonds	4.1%	3.9%	3.9%
US high yield bonds	5.7%	5.5%	5.3%
US cash	3.6%	3.4%	3.3%

Notice how close the 10- and 20-year equity assumptions are, reflecting confidence in stock returns over the long term. The bond and cash rates are lower, which is worth factoring if your portfolio is conservative. 

BlackRock also models boom and bust scenarios. If AI productivity were to surge, it estimates, US large caps could return 18.8% over five years. But if US stocks are overpriced historically, that 5-year return drops to 2.3%. The central estimate sits between those two.

Rough ranges by portfolio type 

Before you get into your specific allocation:

• Heavy equities, 20+ year horizon: 7-9% nominal
• Balanced (around 60/40): 6-7% nominal
• Conservative (more bonds, shorter horizon): 4-6% nominal
• Very conservative (bonds and cash): 3-5% nominal

These are planning inputs. Actual results will vary by year, sometimes by a wide margin.

What’s the Average 401(k) Rate of Return?

A 401(k) with about 60-70% in equities and 30-40% in bonds has returned between 5% and 8% a year over long-term stretches. That range reflects real variability across market cycles and fund choices, but it’s a useful baseline.

The return on a 401(k) that’s 90% allocated to stock index funds will be different from one split evenly between stocks and bonds. The mix of assets in your portfolio determines your return.

To apply the BlackRock estimates to your own portfolio, weigh them by your allocation. If 70% of your account is in U.S. Large Cap Equities and 30% in U.S. Aggregate Bonds, and you have a 20-year time horizon, you’d blend a 7.9% equity return with a 3.9% bond return for a weighted figure of about 6.7%.

Linear vs. Monte Carlo: Two Ways to Use a Rate of Return

Once you’ve settled on an assumed rate of return, there are two ways to use it.

Linear projections apply a single rate to every future year, so your portfolio grows at 7% in year one, year two, and on down the line. That’s easy to follow, and it can be useful for understanding directionally how your plan behaves. The problem is markets don’t work that way. They can go up 22% one year and go down 18% the next, and a linear model can’t show you what happens to your plan if a market downturn follows your retirement.

Monte Carlo analysis captures that by running thousands of different return scenarios (good, bad, mixed) and mapping the full spread of outcomes. The Boldin Planner’s Monte Carlo analysis runs 1,000 simulations. If your plan works in most of them, that’s a strong signal it’s built to hold up. A single projected line at 7% gives you one outcome, and one outcome isn’t a plan.

The Boldin Planner supports both approaches. You can toggle between optimistic, pessimistic, and average rate of return and inflation assumptions to see how different conditions affect your plan’s outlook, and the Planner’s Monte Carlo results can show you a broader picture of possible outcomes.

How to Choose Your Rate of Return: A Practical Framework

Start with your asset allocation.

Look at your holdings across your accounts. The split between equities, bonds, and cash is all you need for a first pass. Every return assumption begins here.

Match your rate to the time horizon of your accounts.

Money you won’t touch for a decade or more can bear a higher assumption. Money you’ll need within a few years should have a lower one. Model them separately rather than blending everything into a single rate.

Enter a nominal rate for each account in the Boldin Planner.

The Planner works in future dollars, building inflation into projected costs as it goes. If you enter a real return instead of a nominal one, your projected balance will appear lower than it should.

Keep an eye on your rate of return assumptions.

Your asset allocation drifts over time, and your time horizon shrinks. Review your return assumptions periodically to make sure they still reflect your actual allocation.

How to Test Your Rate of Return in the Boldin Planner

In the Boldin Planner, you set rates of return at the account level.. That matters because different accounts may have different allocations and different jobs in your plan.

You can apply one of Boldin’s default historically derived rates, enter a custom average rate, or set optimistic and pessimistic assumptions yourself.

Linear projections use a fixed return assumption, while Monte Carlo analysis shows your Chance of Success based on many simulated scenarios.

You also have the ability to model a future change to an account’s rate of return, which can be useful if you expect your allocation to become more conservative later in life or after retirement.

FAQs: Average Rate of Return for Retirement Planning