What number do you use when you calculate total stock market returns?

[mustachianteacher]

I love playing around with retirement calculators, but I always feel like I'm just taking a shot in the dark when I plug in my expected return. What number do people here use for that assumption?

I completely understand that asset allocation is the biggest factor on what a reasonable number is and that expense ratios are also a huge factor, and I definitely take those into consideration. But, as a starting point, what do you guesstimate the average stock market return to be? Or S&P 500?

Roughly 75% of my money is in index funds that mimic the total market, and the rest is split between a bond fund and a target date fund. I'd guess that my average expense ratio is around 0.70%, so I generally use 6.5% or 7% as a guess at average annual expected return. It feels like such an utterly random guess, though, which is what makes me wonder what other people use.

[Seppia]

That seems spectacularly high, especially for money invested at current USA valuations.
I would use a conservative 3-4% at most, you also have to consider you have a pretty strong drag with the 0.7% fees

[mustachianteacher]

See, this is why I'm asking. I was starting to think I might be way too optimistic. ;-)

[Jakerado]

You need to consider your timeline. Over a ~10yr+ period 7% is a good (if slightly conservative) estimate.

[mustachianteacher]

I first started investing in 2000 or 2001 and am planning to work at least another 15 years.

[Spork]

Well, if you look at Vanguard's Admiral Total Stock Market Fund... (VTSAX) -- It has a 5.4% return (and 0.05% expense ratio) since inception (2000).  The Investor funds have been around even longer.  They have a 9.2% (0.17% expense ratio) since 1992.

If you want to calculate total market, you might fudge up or down from there depending on how aggressive/conservative you want to be.

I actually run multiple scenarios, varying interest from 0-8% -- among other factors I vary.

[Heckler]

Here's (see attached) what I used for each index, minus fees.   Returns are in CAD.  I forget the source but I found it somewhere online.  The beauty of indexing is the data is all there for you!   Just gotta find it. 

When your fund says it tracks the MCSI IMI EAFE index (for example), you can actually get the source data from MCSI via the Googles.  Even if your fund is just a year old, it's likely the index is much older. 

https://www.msci.com/documents/10199/595e53a9-a3ed-4d0d-817d-dab6b48353d7