What rate of return can you expect and more importantly, what should you factor in your cash flow spreadsheet analysis? It all depends on your asset allocation.

The danger is to be too optimistic. The question is not only how much return do you want from your portfolio or how successful will you be with your investment strategy. It is more about how much will your investment be making over the long term on an average basis for the next 30 + years. Thirty years is a long time. You need to plan for the worst case scenario.


To estimate the rate of return in your cash flow analysis, you first have to look at your asset allocation.

Let’s say that you have a portfolio of GICs, Bonds and Equity Mutual Funds. Looking at my Andex chart, I can see that since 1950, GICs returned on average 7.3%, Bonds 7.5% and US Equities 12%. Will this continue? Should you factor the same rate of returns? Absolutely not. This is way too optimistic. The above GIC and Bond returns include the early 1980’s where interest rates exceeded 20%. Economic conditions are not the same. I would assume 4% for GICs, 5% for Bonds and 8% for equities. Now all you need to do is estimate the average rate of return proportionally to your own asset allocation to get your overall rate of return.

In my practice, I usually factor 6% rate of return for a medium high risk portfolio made of conservative equities, bonds and very little T-Bills. Conservative equities means high dividend paying stocks, mostly large cap or Blue Chips. Ok, I hear you now…6% returns only! She is not very good. I remind you, it is not just about how much you can make on your portfolio, it is about planning for the worst case scenario. Over stating your rate of return can easily put you in the poor house faster than you think. Underestimating will result in too much money. That is never a problem!

Here is Tip #2: Annually monitoring your rate of return and adjusting your cash flow analysis is key to proper retirement cash flow planning. Better be safe than sorry.

Next blog will discuss, taxation and the average rate you should use in your cash flow retirement plan.

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