What Is "Expected Annual Return"?

"Expected Annual Return" refers to the percentage of growth you expect your retirement savings to earn each year based on investments, such as stocks, bonds, or other assets. It represents the average rate at which your money could grow over time.

How Does It Work?

• If you keep your money in a savings account, the return might be 0.5% - 2% per year.
• If you invest in the stock market, historical average returns are around 6% - 10% per year (depending on risk level).
• If you invest in bonds, returns might be 2% - 5% per year.

This percentage helps the retirement calculator estimate how much your money will grow over time.

Example Calculation

If you start with $10,000 and expect an 8% annual return, your money would grow like this (without additional contributions):

As you can see, the money grows faster over time due to compound interest.

What Number Should You Use?

• If you're investing in a 401(k) or stocks: Use 6% - 8%.
• If you're investing in bonds or low-risk funds: Use 3% - 5%.
• If you're using a savings account: Use 1% or lower.