FAQ: Understanding the Updated Rate of Return Assumptions

Why Are the Rate of Return Assumptions Changing?

Adviice updates its default rate of return assumptions on an annual basis based on the FP Canada Financial Planning Canada guidelines. This ensures your projections use the same evidence-based standards that every Certified Financial Planner (CFP) in Canada should be using.

We are updating these rates to factor in the risk that global uncertainty may have on future returns. By incorporating these standard adjustments, the software ensures your long-term plan remains resilient and realistic.

What Exactly is Changing?

Based on the latest long-term FP Canada guidelines, the default investment returns on the platform have been updated:

  • Equity Return: Adjusted down by 0.15% from 6.71% to 6.56%
  • Bond/Fixed Income Return: Adjusted down by 0.20% from 3.4% to 3.2%

How Will This Affect My Plan?

Because the software projects your financial plan over many decades, even a fraction of a percent change in your rate of return can have a noticeable compounding effect on your long-term projections. When you log in and recalculate your plan, you will likely notice a few changes:

  • Adjusted Success Rate & Plan Funded %: You might see a slight dip in your Success Rate and your Plan Funded percentage. While past outperformance may have boosted these numbers, the model is now adjusting to lower expected growth to conservatively account for future uncertainty.

    In our test accounts, we observed an average Plan Funded change of -4% and an average Success Rate change of 0% to -3%.

  • Lower After-Tax Estate Value: With less aggressive growth applied to your investments, your final estate value at the end of the projection may decrease.

    In our test accounts, the average After-Tax Estate change was -$165,021.

It is important to remember that our sample size includes plans that project out 70+ years. Because of how compounding works, even a very small percentage change creates a massive dollar-value difference when stretched over such a long timeframe.


For example...

On a $1,000,000 portfolio the decrease in equity return 6.71% to 6.56% meant a decline in After-Tax Estate Value of $155,440 in Today's Dollars over a 30-year period.

However, if the portfolio starting balance was $1,050,000 (perhaps due to strong returns in 2025 there was an increase of $50,000 versus the previous year's plan) then the decline in the rate of return assumption was entirely offset.

What If My Plan Saw a Much Larger Drop?

While the averages reflect moderate changes, some plans will not stick to the average. You might see larger shifts, such as a 10%+ drop in your Success Rate or a decrease of $300,000 or more in your After-Tax Estate Value. If this happens, here is what is likely going on under the hood:

  • 30/40/50+ Year Projections: A fraction of a percent change seems small, but in plans projecting out 50 or more years, that tiny difference compounds exponentially over time.
  • "Bunched" Success Rate Lines: In the platform, any historical period that finishes above zero, even if it is just $1 left over, is considered a successful path. If your previous projection had many historical paths "bunched" together just barely succeeding above the $0 mark, a small decrease in returns can push a cluster of those lines below zero. This can cause a 100% success rate to quickly drop to 80%, even though the actual dollar shortfall in those specific paths might be quite small.

What Should I Do Next?

To see how these new rates impact your specific projections, and to realign your plan with your goals, we recommend taking the following steps:

  1. Recalculate Your Plan: Navigate to Planning > Projections and click "Recalculate" to apply the new FP Canada return assumptions to your existing plan.
  2. Revisit Your AI Strategies: A change in expected returns can shift the optimal withdrawal strategies. Open the AI Strategies menu to see if a different decumulation order or RRSP Meltdown strategy now offers a better After-Tax Estate Value based on the new projections.
  3. Rework Your Spending Guardrails: Review your guardrails for Maximum and Safe Spending. Note: In our sample testing, we found that most accounts could be brought back to their previous success levels and estate goals with just a few small tweaks to these spending targets. Even a $250/month reduction in the "Safe" spending guardrail was enough to move the success rate back up 3-5%+. In Planning > Projections, use the AI Strategies for "Retirement Spending" to quickly evaluate how a small amount of spending flexibility can improve the plan.