What interest rate do you use for FV?

[Mrs. Dinero]

What interest rate do you use for future value calculations for retirement accounts ? Do you use several?

[tractor]

Me personally, I don't use any future value because I feel it's too much of a guessing game. Even though I am now less than 10-years out from retirement, I just look at the current cash value and ask "is that enough". I also know that as I continue to contribute, the value will go up. Any additional gains are just a bonus to me.

[minnesotapaintlady]

I'll run different scenarios with different rates just to see what it "could" be, but as tractor said, it's just guessing.  I'm thinking of retiring in about 5 years and it could just as easily be negative or flat the next 5 years as positive.  If it IS negative, I'll probably not be retiring in 5 years.

[souldoubt]

My FV calculation uses 6, 7, 8 and 9% scenarios.  Like tractor and MPL said though it's all a crapshoot as we could see a flat period like 1966-1981 over the next 15 years but hopefully that isn't the case.

[resolution]

I usually just plug my numbers into www.firecalc.com/ . It runs about 120 simulations based on historical stock market info.

[azucena]

It's such an unknown that you're best to sensitivity test several options - I use 5%, 7%, and 11% and also firecalc.

[Rukh O'Rorke]

Sept 16, 2023 13:42:45 GMT -5 minnesotapaintlady said:

 If it IS negative, I'll probably not be retiring in 5 years.

[haapai]

I tend to use a range of "i"s between six and ten percent.  I cannot get myself to imagine a twelve percent annual rate of return even though I've seen plenty of those. 

On the other hand, I rarely perform an actual future value calculation.  I tend to build spreadsheets instead, especially when comparing the choice between two options or if there are significant transaction costs involved.  It's nice to see the break-even point and how it moves around (or doesn't move around very much) with different "i"s. 

[laterbloomer]

I do 4%, 7% and 10% just to see. But mainly I use 7% for planning purposes. That seems conservative enough to be realistic without being depressing.

[pulmonarymd]

Our advisor is using 6% until retirement, then 4%. Run out of money at 94. I’m good with that

[tskeeter]

Our advisor used the same rates that pulmonarymd’s advisor used.  I think they are a bit conservative.  But they help build some margin for error into your plans.