Could Your 401(k) Be Overestimating Your Future? What to Check Now

If your retirement calculator still assumes an 8% return on your 401(k), your plan may be built on shaky math. Traditional tools often rely on outdated expectations for market performance—numbers that don’t match today’s economic outlook. And if you’re using inflated return assumptions, there’s a good chance your retirement timeline is off track.

According to financial advisor Kevin C. Feig, founder of Walk You To Wealth, retirement calculators and other tools leveraging technology, and even artificial intelligence (AI), can be a “great tool,” but he has seen an increase in clients who utilize “cherry-picked assumptions.” Some might use returns from the last 10 years instead of longer-term historical returns, or others might use overly aggressive projected returns. That can lead to overconfidence and under-saving.

The Outdated Math Behind Your Retirement Planning

Many online tools still assume long-term returns of 8% or more by default, especially for diversified portfolios like the classic 60/40 mix of stocks and bonds. But Feig warns that’s not always realistic, and sometimes, tools will allow you to be overly aggressive. “I’m seeing more potentially unrealistic assumptions, such as a 12% stock market return,” he says. In some extreme cases, clients may even turn to AI tools that recommend leveraged investments promising 20%+ returns, without fully understanding the risks.

Feig also suggests looking at returns over the longest horizon possible to avoid boosting your assumptions from recently high returns. For example, the standard 60/40 portfolio has returned about 6.1% annually since 1990—but only 5.4% since 1970.

What Returns Really Look Like in Today’s Market

So, what are more realistic expectations?

A recent market outlook from Goldman Sachs pegged the future return for a 60/40 portfolio at about 5.7%, assuming inflation of 2% to 4%—far lower than the traditional 8% used by many calculators. Stocks may still outperform over the long term, but bond yields remain low by historical standards, dragging down overall portfolio projections.

Feig cautions against leaning too heavily on predictions: “Personally, I use historical returns because no one can accurately predict the market.” Even so, he stresses that relying on short-term historical gains—like the last decade of stock performance—can be dangerously misleading.

Recalculating Your Retirement Timeline

If your retirement plan was built on overly rosy assumptions, all is not lost—but you should look into making adjustments.

Feig often walks clients through “mapping out the possibilities,” showing how even small changes—like contributing more or adjusting your target retirement age—can have a major impact. “When a client sees that their current trajectory has a 0% chance of success, but financial changes result in a 70% to 90% chance of success, it’s generally all the encouragement needed,” he says.

Other strategies might include revisiting your asset allocation, increasing catch-up contributions, or rethinking what retirement looks like altogether. “An often-overlooked tactic that I discuss with clients is working in retirement,” Feig says. “Not the soul-sucking job that they may have today, but something that provides some mental stimulation and income.”

The Bottom Line

If your 401(k) projections are based on inflated return assumptions, it’s time for a reality check. Market expectations have shifted, and failing to adjust could leave you short. The good news? Even modest changes, made early, can dramatically improve your odds of long-term success.

As Feig puts it: “Having a plan makes you less likely to panic.” And in today’s uncertain markets, that peace of mind may be the most valuable asset of all.