One of the hardest parts about investing is the fact that it’s impossible to predict the future but you have to set some baseline expectations about the future for the purposes of planning.
You set some expectations at the outset but then adjust them over time as both reality and circumstances change or come to fruition. But you have to start somewhere and I like this idea of figuring out real stock and bond return expectations. That ‘real’ part of the equation means after inflation which is important for retirees because most people who aren’t working anymore care deeply about ensuring their portfolio keeps up with their standard of living over time.
Here are the nominal and real returns for stocks (S&P 500), bonds (10 year treasuries) and cash (3 month T-bills) going back to the late-1920s: