To provide perspective, the highest total annualized pretax return on the S&P 500 over any calendar decade since 1926 was 19.4% in the 1950s. The lowest was -0.9% in the 2000s. The simple average return over the period 1926-2010 is 11.9%.
We caution that entering long-term net asset return assumptions over 15%, or below -2% would generally be outside the range of returns historically experienced by U.S. equities
To provide perspective, the highest total annualized pretax return on long-term U.S. treasury bonds over any calendar decade since 1926 was 12.6% in the 1980s. The lowest was -.01% in the 1950s. The simple average return over the period 1926-2010 is 5.6%.
We caution that entering long-term net asset return assumptions over 10%, or below -2% would generally be outside the range of returns historically experienced by U.S. treasury bonds.
The Simulator provides a "safety cushion" feature, allowing you to select a minimum asset level, below which you would not want assets to go. Depending on other input assumptions, assets may still drop below this safety cushion, but the Simulator is designed to select an optimum level of longevity insurance to reduce the chance of this happening. The higher the safety cushion, generally the higher the recommended longevity insurance and the lower the median outcome for the asset projection. For this reason, the default value of the safety cushion is set at zero. Money death is deemed to occur if assets drop below the safety cushion, so if it is set at zero, money death occurs when all assets are gone.
These assumptions will be applied to the simulated returns in your portfolio. They may be affected by what type of assets you expect to own in the asset class. For example, the volatility of long maturity bonds could generally be higher than that of intermediate or short-maturity ones. Similarly, volatility of emerging market equities may be expected to be higher than domestic stocks.
The default values for volatility and correlations for each asset class have been selected taking into account historical returns on each asset class. For equities both global and U.S. equity measures were reviewed, and for fixed income and cash, just U.S. measures. They are not predictions and we strongly recommend that users input their own estimates.
For definitions of volatility and correlation, please see the About page.