Best Interest Rate Assumptions to Use
Pick the wrong projection rate and your retirement plan becomes either unrealistic or overly cautious. This guide gives sensible default rates for each major asset class, plus tips for stress-testing your projections.
Quick answer
Standard defaults: 4–5% for high-yield savings, 4–6% for bonds, 7% for diversified stocks (real, after inflation) or 9–10% (nominal). Use 6% as an all-purpose conservative number.
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.
Use the calculator
Test different return assumptions
See how 4%, 6%, and 8% change your final balance.
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Frequently Asked Questions
Can I assume 10% for my whole career?
It's possible, but planning for 6–7% is safer. If reality beats it, you retire early. If reality misses, you're not in trouble.
What about crypto or individual stocks?
Don't use them in baseline projections. Their volatility is too extreme for reliable planning. If you hold them, treat them as upside, not core.
What rate do financial advisors use?
Most professional planners use 5–7% real return for diversified portfolios. A few use 4% to be very conservative.
Should I use different rates for different goals?
Yes. Short-term goals (1–3 years) should use savings rates. Medium-term (3–10) can blend bonds and stocks. Long-term (10+) can be heavier in stocks with the higher rate.