Best Interest Rate Assumptions to Use

Default rates by asset type

• Checking: 0% — assume no growth.
• High-yield savings: 4–5% (current); long-term average closer to 2–3%.
• Money market: similar to savings, slightly lower.
• Bonds (intermediate-term): 4–6% nominal long-term.
• S&P 500 / total stock market: 9–10% nominal, 7% real, long-term historical.
• 60/40 stock/bond portfolio: 7–8% nominal, 5% real.
• Real estate (private equity): 8–10% long-term.

Real vs nominal — pick one and stick with it

Nominal returns are the headline numbers. Real returns subtract inflation. If you're projecting in today's dollars, use real returns. If you want the future-dollar number, use nominal.

Mixing the two is the #1 mistake in DIY retirement planning. Pick one framework and apply it consistently.

Stress-test with three scenarios

Always run a low, medium, and high case. For a long-term stock portfolio, that might look like:

• Pessimistic: 4% real
• Expected: 6–7% real
• Optimistic: 9% real

If your retirement plan only works at the optimistic rate, it's not really a plan — it's a hope. Adjust until the pessimistic case still works.

Why not assume the historical 10%?

Long-term US stock returns have been ~10% nominal — but they include both above-average decades (1990s) and below-average ones (2000s). Future returns may also be lower due to higher current valuations and lower bond yields. Most planners now use 6–8% nominal for forward planning to stay conservative.

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Frequently Asked Questions