Asset allocation can be accounted for through the optimistic and pessimistic rate of return assumptions for your accounts in the Planner. While we can't tell you what rates to enter in your own plan, we can provide this general guidance.

For a deeper discussion around this topic see this article.

The rates you enter will drive the growth of your portfolio in the Planner and affect many aspects of your plan. If you are looking for a point of reference, you might use you current asset allocation, historical portfolio or fund averages, or your 10 year average annual return. As an example, if the historical rate of return for my chosen asset allocation is 5, I might enter an optimistic rate of return of 7 and a pessimistic rate of return of 3, an optimistic rate of return of 6 and a pessimistic rate of return of 4, or an optimistic rate of return of 8 and a pessimistic rate of return of 2. The higher the optimistic rate of return, the more variability you’ll see in the Monte Carlo and vice versa.

If you feel that the historical rate of return is not the best indicator of the future, you may choose to enter slightly lower figure to compensate for future uncertainty.

**Cash Accounts**

If you are modeling cash accounts, such as general savings and emergency funds, you may consider a very conservative rate of return aligned with current savings account interest rates.

*Cash Accounts Example*

*The values in this chart are examples and should not be considered recommendations for your model.*

**Investment and Retirement Accounts**

If you are modeling investment and retirement accounts, you should consider aligning rates of return with the allocation of the holdings in each account and enter an average expected return for the account.

If your account is invested aggressively, holding mostly stocks, you may consider using a higher optimistic rate of return for your assumption.

If your account is balanced, holding a portion of stocks and bonds, then you may consider using a rate of return that is less than your aggressive assumption.

If your account is conservative, holding mostly bonds, then you may consider using a lower optimistic rate of return for your assumption.

*Retirement Accounts Example*

*The values in this chart are examples and should not be considered recommendations for your model.*

**Reference**

If you would like to know the historical Rates of Return for various asset allocations, sorted by the ratio between equity and fixed income, you may want to refer to this publication by the Vanguard Group: Historical Returns