--- title: What is a Realistic Rate of Return in Retirement? description: Learn more about the realistic rate of return in retirement. image: https://www.realized1031.com/hubfs/how%20states%20tax%20retirement%20income%20pt%203-1210578719.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # What is a Realistic Rate of Return in Retirement? Posted Sep 19, 2022 ![how states tax retirement income pt 3-1210578719](https://www.realized1031.com/hs-fs/hubfs/how%20states%20tax%20retirement%20income%20pt%203-1210578719.jpg?width=750&height=392&name=how%20states%20tax%20retirement%20income%20pt%203-1210578719.jpg) The answer depends on several factors, including which assets you’re invested in and your risk profile. We’ll look at a number of risk assets to get an idea about what a realistic rate of return can be in retirement while also factoring in risk profiles. ### Risk Profile The old adage that higher risk generally equates to higher returns generally holds. Those who are younger tend to take on more risk than those who are older. The main reason for these differences is the time horizon.  If you have 30+ years before retirement, short-term fluctuations in the market aren’t going to matter much. But market fluctuations are an important factor for those who are about to retire in less than five years. This is mainly because retirees don’t want to take distributions in a down market, which can deplete their retirement principal disproportionately. Those who can tolerate higher risk can assume better returns. For asset classes with lower returns, [leveraging](https://www.realized1031.com/glossary/financial-leverage) them up (i.e., taking on more risk) can create potentially better returns. Of course, on the flip side, this can also create larger losses. If we break down three asset classes, bonds, real property, and stocks, by risk profile, we’ll get something that looks like the following, historically speaking: Bonds — low risk, low return Real property (i.e., real estate) — medium risk, medium return Stocks — high risk, high return Note that when we say real estate, we mean real property rather than REITs. ### Rates of Return By Asset Class When it comes to returns, the asset class matters; the configuration of asset classes in a portfolio is determined by the investor’s/retiree’s risk profile. Let’s look at the above three asset classes within the context of risk profile. We’ll use three different risk profiles — conservative, moderately conservative, and moderate. We’ll define these configurations using [data from Charles Schwab](https://www.schwab.com/learn/story/structuring-your-retirement-portfolio). - Moderate (ages 60-69): 60% stocks, 35% bonds, 5% cash equivalents - Moderately Conservative (ages 70-79): 40% stocks, 50% bonds, 10% cash equivalents - Conservative (ages (80+): 20% stocks, 50% bonds, 30% cash equivalents For retirees, bonds generally make up a large portion of their portfolio. You can see this in the above configurations for those 70 and over. Retirees need to avoid volatility since distributions make up a large part of their retirement income. Treasury bonds are fairly stable but produce a small income. Stocks are still held in these configurations as they are the main income generator. What do returns look like for these portfolios? As we move from higher to lower risk, you’ll see returns are the inverse, which is expected. - Moderate: - Moderately Conservative: - Conservative: One might contemplate the advantage of the Moderate vs. Moderately Conservative portfolio given the larger drawdown potential. Both portfolios returned an average of 9%, but the Moderate portfolio has nearly 2X the drawdown. This goes back to risk profile. If an investor can tolerate the larger drawdown, they may view the potential +4% as worth the risk. These configurations show that retirees should expect a 7-9% annual return, depending on their risk tolerance. By working with a financial adviser, you can determine your risk tolerance and overall portfolio configuration to meet your financial goals. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. All real estate investments have the potential to lose value during the life of the investment. All financed real estate investments have the potential for foreclosure. A bonds yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news, and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa. You could receive back less than you initially invested and, unless otherwise noted, there is no guarantee that you will receive any income. Learn Ways to Help Reduce or Defer Taxes [![Learn Tax-Deferred Strategies](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Tax-ebook-250b.png?width=250&height=295&name=IPWM-Tax-ebook-250b.png "Discover ways to potentially ...") ](https://www.realized1031.com/blog/what-is-a-realistic-rate-of-return-in-retirement#blogform) Download eBook ---   --- ### Learn Tax-Deferred Strategies ![Learn Ways to Help Reduce or Defer Taxes](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-Tax-ebook-550a.jpg?width=550&height=600&name=IPWM-Tax-ebook-550a.jpg) Discover ways to potentially grow wealth by managing taxes. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "The answer depends on several factors, including which assets you’re invested in and your risk profile. We’ll look at a number of risk assets to get an idea about what a realistic rate of return can be in retirement while also factoring in risk profiles. Risk Profile The old adage that higher risk generally equates to higher returns generally holds. Those who are younger tend to take on more risk than those who are older. The main reason for these differences is the time horizon. If you have 30+ years before retirement, short-term fluctuations in the market aren’t going to matter much. But market fluctuations are an important factor for those who are about to retire in less than five years. This is mainly because retirees don’t want to take distributions in a down market, which can deplete their retirement principal disproportionately. Those who can tolerate higher risk can assume better returns. For asset classes with lower returns, leveraging them up (i.e., taking on more risk) can create potentially better returns. Of course, on the flip side, this can also create larger losses. If we break down three asset classes, bonds, real property, and stocks, by risk profile, we’ll get something that looks like the following, historically speaking: Bonds — low risk, low return Real property (i.e., real estate) — medium risk, medium return Stocks — high risk, high return Note that when we say real estate, we mean real property rather than REITs. Rates of Return By Asset Class When it comes to returns, the asset class matters; the configuration of asset classes in a portfolio is determined by the investor’s/retiree’s risk profile. Let’s look at the above three asset classes within the context of risk profile. We’ll use three different risk profiles — conservative, moderately conservative, and moderate. We’ll define these configurations using data from Charles Schwab. Moderate (ages 60-69): 60% stocks, 35% bonds, 5% cash equivalents Moderately Conservative (ages 70-79): 40% stocks, 50% bonds, 10% cash equivalents Conservative (ages (80+): 20% stocks, 50% bonds, 30% cash equivalents For retirees, bonds generally make up a large portion of their portfolio. You can see this in the above configurations for those 70 and over. Retirees need to avoid volatility since distributions make up a large part of their retirement income. Treasury bonds are fairly stable but produce a small income. Stocks are still held in these configurations as they are the main income generator. What do returns look like for these portfolios? As we move from higher to lower risk, you’ll see returns are the inverse, which is expected. Moderate: Best year: 31% Average annual return: 9% Worst year: -21% Moderately Conservative: Best year: 27% Average annual return: 9% Worst year: -13% Conservative: Best year: 23% Average annual return: 7% Worst year: -5% One might contemplate the advantage of the Moderate vs. Moderately Conservative portfolio given the larger drawdown potential. Both portfolios returned an average of 9%, but the Moderate portfolio has nearly 2X the drawdown. This goes back to risk profile. If an investor can tolerate the larger drawdown, they may view the potential +4% as worth the risk. These configurations show that retirees should expect a 7-9% annual return, depending on their risk tolerance. By working with a financial adviser, you can determine your risk tolerance and overall portfolio configuration to meet your financial goals. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. All real estate investments have the potential to lose value during the life of the investment. All financed real estate investments have the potential for foreclosure. A bonds yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news, and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa. You could receive back less than you initially invested and, unless otherwise noted, there is no guarantee that you will receive any income.", "articleSection" : [ "Retirement Income" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2023-07-28T14:26:51+0000", "datePublished" : "2023-07-28T14:26:51+0000", "description" : "Learn more about the realistic rate of return in retirement.", "headline" : "What is a Realistic Rate of Return in Retirement?", "image" : { "@type" : "ImageObject", "height" : 392, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/how%20states%20tax%20retirement%20income%20pt%203-1210578719.jpg", "width" : 750 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/what-is-a-realistic-rate-of-return-in-retirement", "name" : "What is a Realistic Rate of Return in Retirement?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/how%20states%20tax%20retirement%20income%20pt%203-1210578719.jpg" } ```