A lot of retirement projections seem to assume an 8% rate of return. Is this realistic?
Many financial advisors would feel that an 8% rate of return is too high, and are more likely to work with 4-5% estimated return, depending on the dollar amount that is assumed will be invested.
The 8% (or more) rate of return became the norm for financial advisors when doing projections during the 1990s and 2000s because the portfolios that they managed were producing 8% returns, and in some cases, even higher returns. By 2008, however, things had begun to change as advisors became less optimistic about the likelihood that these high returns would be possible going forward on a consistant basis.
Unfortunately, Investopedia does not know of a nice safe place for one's nest egg that pays 8%, and it is unlikely that anyone else does either. That said, take financial articles for what they are worth: general education to increase awareness. If you are looking for projections that apply to you, visit a professional. Your best bet would be to contact a financial planner and create a plan that best suits your needs for today and your golden years. (For more on retirement planning, check out our Retirement Planning Tutorial.)