Is an 8% Annual Return Realistic for a Balanced Retirement Portfolio?

Many retirement calculators still use an 8% annual return assumption for a balanced portfolio. That figure may seem comforting when planning how much you need to save for retirement, but it’s increasingly out of step with current market expectations. Investors should rethink assumptions and focus on realistic, inflation-adjusted outcomes when building retirement plans.

Why 8% Feels Outdated

Financial professionals warn that expecting an 8% return over the long term for a typical balanced portfolio is optimistic. “Certainly that’s too high,” says Ted Karon, an investment counsellor at Kerr Financial Group in Toronto. He and other advisers say a more realistic long-term expectation for a balanced mix of stocks and bonds is closer to 4%–6% after fees.

Part of the disconnect comes from how returns are reported and remembered. There were periods when bonds yielded 6%–9% and stocks routinely produced double-digit gains, but those times often coincided with much higher inflation. When inflation is running at 4% or more, nominal returns need to be substantially higher to deliver meaningful purchasing power growth. Today’s lower nominal returns still may outpace inflation by a reasonable margin, but they aren’t the eye-popping numbers many calculators assume.

Focus on Real Returns, Not Just Nominal Gains

What really matters for retirement planning is the real return—the return after inflation and fees. A portfolio earning 5% nominally might still deliver a meaningful real return if inflation is low, and that should be the focus when estimating how long savings will last and how much income they can support in retirement. “The real return is the key number you’re looking for,” Karon explains.

Accounting for fees is also crucial. Management and transaction costs reduce your effective returns, so projected growth should be net of those expenses. Many retail investors overlook how fees compound and erode long-term results, making conservative, fee-inclusive assumptions more realistic for planning.

Historical Norms vs. Future Expectations

Historically, a 60% stocks / 40% bonds allocation has produced long-term returns that, on average, were in the ballpark of 8% in nominal terms. That history explains why some calculators still use that figure. However, past performance does not guarantee future outcomes, and market conditions change. Ted Rechtshaffen, president and CEO of TriDelta Financial Planners, points out that while many clients argue that 8% is unattainable now, markets may revert toward historical norms over decades. “Clients tell us you can’t get 8%,” he says. “This year that might be true, but over the next 30 years, I’m not so sure.”

How to Plan Practically

For retirement planning, use conservative, realistic long-term return assumptions and run sensitivity tests. Model outcomes using a range—such as 4%–6% real returns for a balanced portfolio—so you can see how different market environments would affect your retirement income and savings horizon. Include inflation, fees, and taxes in those scenarios to get a clearer picture of purchasing power in retirement.

Other practical steps include diversifying across asset classes, controlling costs through low-fee funds where appropriate, and regularly revisiting assumptions as market conditions and personal circumstances change. A plan built around a range of outcomes rather than a single optimistic number will be more resilient in the face of market variability.

Bottom Line

Relying on an 8% annual return assumption for retirement planning is likely too optimistic for most investors today. A more prudent expectation for a balanced portfolio is in the mid-single digits after fees, and the most useful measure is the real return after inflation. Use conservative assumptions, include fees and inflation in your calculations, and stress-test your plan with multiple scenarios to ensure your retirement goals remain achievable under different market conditions.

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