Before-retirement return is the percent gain you expect to receive on your current investments and future savings between now and retirement. Tax-deferred investments gains are reinvested each year without being taxed, until you withdraw them. Taxable investment gains are taxed before being reinvested. To make your plan work, the annual return you select must permit your investments to grow enough to fund your retirement years.
After-retirement return is the percent gain you expect to receive on your investments after your retire. To make your plan work, the annual return you select must permit your investments to grow enough to fund your retirement years.
Choosing the appropriate rate of return depends on:
- Your retirement objectives, and the rate of return you will need in order to provide enough income in retirement.
- Your tolerance for risk. Only you can determine how you feel about investment risk.
Your financial plan helps you determine the rate of return you need to cover your retirement expenses. The higher it is, the more risk you will need to take in your investments.
If you can ignore the daily ups and downs of the market and focus on the long-term, you might consider investing in higher risk assets. However, once you reach retirement age, you need a more stable income from your investments. Greater stability usually means lower risk, so you might consider choosing a lower potential return rate for your after-retirement rate than for your before-retirement rate.
This information is used to help you estimate how much your investments may be worth at retirement and to determine if they are sufficient to meet your retirement needs.
If you need more assistance in selecting a target rate of return, click Done to return to the main Rate of Return page and choose any of the links under What's your rate of return? at the top.
