On this week’s episode of Tape Talk, Quint and Daniel take a deep dive into investors’ required rate of return. What is it? Why is it important? And, how does it factor into your financial plan?


Before going too far into our topic of the week we take a look at news hitting headlines over the past week. One, in particular, has caught investors’ attention, the annual update on the Social Security Trust Fund. This report highlights two important numbers for retirees to consider. First, the date when Social Security is estimated to start using its reserves to pay benefits. Second, when those reserves will be depleted and benefits may need to be cut if Congress doesn’t act beforehand. While these dates may seem far off, they are important to incorporate into your financial planning now to minimize the potential impact later.

Required Rate of Return

Your required rate of return is the return you need on your investments based on starting value, contribution, and time to your goal. This number is important because it must be assessed with the current market environment to determine if your goal is reasonable. While the goal you have could be anything, we most often talk about the required rate of return in regards to retirement. The reason for this is simple, it’s one of the goals people want as little margin of error as possible. For that reason, we dissect what this metric means to investors as they begin planning for their future retirement.

Risk Temperament

The return you need is not the only important factor to consider in financial planning. The amount of risk you can physically and emotionally stomach is also critical to your success. It’s for this reason that we work closely with people to determine if their required rate of return and their risk temperament are in alignment. Once they are, investors are typically well on their way to a fruitful financial planning journey ahead.