Projected investment returns

Within the WealthStep Planning/Saving advice engine, future investment return expectations are utilized as part of the calculations, including to estimate your retirement “nest egg” (amount needed to start retirement/stop working). WealthStep utilizes a combination of econometric forecasting and historical averages in formulating these return and inflation numbers. Geometric returns with risk (standard deviation) factors are utilized to ensure that the impact of volatility is embedded in the projections, rather than straight-lining projections without factoring volatility (the latter of which has the effect of overstating returns). The projected returns are statistical mid-points of a probabilistic distribution, are not specific predictions for what will happen in any given year in the future (in fact, it is expected that any given year’s return will vary significantly from the projection in the short-run, but that over time, returns should roughly approximate the projections, adjusted for inflation). The projected returns assume that WealthStep users follow the WealthStep life-stage investment patterns, and the projections utilize asset allocation (stock/bond mix) patterns that decrease volatility risk and return over time, and therefore the returns vary by age group. See the Investment Advice module’s advice page for additional information about projected returns. If your life plans and/or portfolio asset allocations will be significantly different than the WealthStep life-stage investing/asset-allocation recommendations, you may wish to consult a qualified, objective, fee-only financial planner for additional assistance.