The Motley Fool Discussion Boards

Previous Page

Retirement Discussions / FIRE Wannabees

URL:  http://boards.fool.com/although-you-can-choose-any-rate-of-inflation-and-25964473.aspx

Subject:  Re: Calculating potential account growth & infla Date:  10/4/2007  2:48 PM
Author:  2old4bs Number:  4410 of 5068

Although you can choose any rate of inflation and return, I prefer to use rates based on some actual historical numbers. The latest 'history' I have available for both S&P500 returns and inflation are for the period 1961-2006. I calculate the average annual inflation rate for that time period at 4.3%, and the average annual S&P500 return at 8.46%, for a net 'real' return of 4.17%. More conservative folks than I use 2%, and there are lots of folks who use more than 4.17% (i.e. 8%-3% = 5%). If that happens, I'll be thrilled, but I prefer a more conservative number. YMMV,

2old
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us