What interest rate is reasonable to assume (after tax)?

[hopetogetfi]

I know that there is no guarantee, it is unpredictable, etc. However, in order to calculate my possible retirement date as close as possible, I need to assume some interest rate. I would like to have approx 60% invested in some index stocks fund and 40% in some index bond fund, possibly with Vanguard. I do not plan to actively manage my investments, no ETFs, just 60/40 as described above. I might be willing to go 70/30. I need to assume that I will have to pay taxes on the earned interest. I actually do not know exactly my tax rate, maybe 20%? Is 7% (after tax) rate reasonable to assume, or is it more like 5%? Thanks!

[matchewed]

Your return (what you keep calling the interest) is calculated prior to tax. So just apply your tax rate to your anticipated return, but only the return.

In this case, mathematically speaking, if your return is say 7% but your tax rate is 20% your real return is 5.6% ((.07)-(.07*.2))=5.6. This is because the tax rate is applied to the amount which was returned to you for investment, the initial amount invested is not taxed. This is overly simplified and will depend on the particular tax rate, how it is structured, and anticipated return.

As to what is reasonable, look up average returns for your particular asset allocation, run a portfolio simulation and see.

Free advice, use tax advantaged accounts and you won't have to assume you have to pay taxes on the return.