All the Numbers

Expected returns and fees

From the All the Numbers wiki · Investing

Every investment account in the plan grows at one annual rate. Unless a rate is entered, that rate is the default below. It is the central estimate of a long-run average. Real years run above and below it; Monte Carlo shows how far, using the yearly spread that goes with each expected return (11.02% at the default).[1]

The rules

  • Default: 6.35% a year. This is PWL Capital's expected return for a market-weighted portfolio of 80% equities and 20% Canadian bonds, from its 2026 planning assumptions.[2] For comparison, the same paper gives 6.92% for all equities, 5.73% for 60/40 and 3.58% for all bonds.[1]
  • Nominal. The 6.35% includes inflation. With the default inflation of 2.5%,[3] the return after inflation is about 3.8%; see inflation and today's dollars.
  • Net of fees. PWL's figures already subtract the management expense ratios of the funds that make up the portfolio, so the default is what an investor keeps before tax. A rate entered from a fund's gross performance would need the fee taken off first. See also net worth, which grows from this rate.
  • Cash is separate. Uninvested cash earns the posted savings rate rather than the investment return;[4] see cash.
  • Distributions. A fund or stock can pay out part of its return as dividends, interest or capital gains, or as return of capital. Each is taxed according to what it is,[5] and a reinvested distribution adds to the cost base;[6] see capital gains, dividends and foreign withholding tax.
  • Fees paid separately. Investment counsel and management fees paid outside the fund are deductible in a non-registered account. Trading commissions are not; they adjust the cost base or the proceeds instead.[7]

What the engine does

  • Applies the rate to every new investment account until a different one is set, and grows the balance through the year at that annual rate.
  • Treats the rate on any account as its total return.
  • Pays part of a non-registered account's return out each year, taxed that year. A diversified portfolio pays interest, dividends and some capital gains every year, and they are taxed in the year paid even when reinvested. The plan uses PWL's figures for its 80/20 portfolio: each year about 0.66% of the value in interest, 0.67% in foreign dividends, 0.51% in Canadian dividends and 0.45% in capital gains.[8] They are paid a twelfth each month and reinvested in the account, adding to its cost base, so the account's total return is the rate you entered and the rest of it is growth in price, taxed when sold.[9] Every non-registered account is taken to hold that mix; an account whose rate is below the total pays less, in proportion, and one at 0% pays none. Foreign dividends are taxed in full: the US tax withheld inside a Canadian fund never reaches your return as a credit. See dividends.
  • Accepts other distributions and separately paid fees as dated events on a non-registered account.

What it deliberately does not

  • It does not add a fee on top of the rate. The rate is already net, so a fee entered separately would be counted twice.
  • It does not vary the return by year in a plain projection. Variation comes from the Monte Carlo and stress tests.
  • It does not split a registered account's return into interest, dividends and gains, or deduct fees inside registered accounts such as the TFSA or the RRSP.

See also

  • Auto-allocation · When switched on, money left after spending and your own contributions is placed for you down a priority list — FHSA, then RRSP, then TFSA, then non-registered by default — each account taking what its room allows. Every dollar it moves is shown, by account, on each month and year.
  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Foreign withholding tax · A foreign country can withhold tax from dividends paid to Canadians; for US dividends the treaty rate is 15%. The foreign tax credit recovers it in a non-registered account, but a TFSA gets no recovery and an RRSP is exempt.
  • How dividends are taxed · Canadian dividends are grossed up by 38% (eligible) or 15% (other), taxed as income, then reduced by a federal and Ontario dividend tax credit. The credits make dividends tax less than interest at the same income.
  • Inflation and today's dollars · The default inflation rate is 2.5% a year. A future dollar amount can be shown as is, or divided by (1 + inflation) for each year to show what it would buy today.
  • Money you have not told the plan to invest · Income the plan does not spend and you have not allocated to an account is held as cash, earning the posted savings rate. It is not swept into an investment account, and it never over-fills a registered one.
  • Monte Carlo: many market histories · The Simulation page runs the plan 500 times with investment returns and home prices drawn at random each year, then shows the spread of net worth and how many runs finish, borrow or run out of money.
  • Net worth, as the plan counts it · Net worth is everything the plan holds (cash, investment and registered accounts, homes at market value) minus mortgages, credit lines, debts and tax owing. It is not reduced for selling costs or for tax on money still in an RRSP.
  • Renting versus buying · All the Numbers compares a plan that buys a home with the same plan that never buys, and the money the home would have taken stays in your accounts and is saved like any other leftover cash. It shows when owning pulls ahead on net worth, if it does. It is a comparison under assumptions, not a verdict.
  • RRSP room, deduction and withdrawals · Room accrues at 18% of earned income up to the annual cap, contributions earn a deduction refunded the following April, and withdrawals are taxed as income. The plan assumes you start with no carried-forward room unless you say otherwise.
  • Stress tests · A stress test reruns the whole plan with one thing made worse, such as a higher mortgage rate at renewal or a year of lost income, and reports how far final net worth moves and whether the plan still pays its bills. It carries no probabilities.
  • TFSA contribution room · Room starts accruing the year you turn 18, not the year you open an account, and it never expires. Withdrawals come back the following January. Limits past 2026 have not been announced, so the plan projects them by the rule the Act sets and says so.
  • The savings accounts at a glance · The TFSA, RRSP, FHSA, RESP, RRIF and non-registered account each have their own room, tax treatment and withdrawal rule. This page gives one short paragraph on each, with the entry that covers it in full.
  • Where the down payment comes from · The cash to close is assembled from the plan's projected balances in a fixed order — FHSA, TFSA, unregistered, HBP, then taxed RRSP — and each dollar is priced for what taking it costs.
  • Which assumption matters most · The sensitivity chart moves one assumption at a time, down and up by a fixed step, and ranks them by how much the final net worth in today's dollars changes. Inflation is often the largest bar because it moves much more than one number.

References

  1. ↑PWL Capital — Financial Planning Assumptions (Market Capitalization Weighted Portfolio), mid-year 2026 data update, Table 8 (Portfolio Expected Returns) · Yearly volatility (standard deviation) of a diversified portfolio by its expected return: 13.03% at 6.92% (100/0), 11.02% at 6.35% (80/20), 9.12% at 5.73% (60/40), 7.42% at 5.06% (40/60), 5.41% at 3.58% (0/100) (PWL Capital, Financial Planning Assumptions, Table 8) · See the source · effective 2026-08-17
  2. ↑PWL Capital — Financial Planning Assumptions (Market Capitalization Weighted Portfolio), mid-year 2026 data update, Table 8 (Portfolio Expected Returns) · Default expected return on an investment account a year, nominal and net of fees, for an 80/20 equity/bond market-cap portfolio (PWL Capital, Financial Planning Assumptions, Table 8) · 6.35% · effective 2026-08-17
  3. ↑PWL Capital — Financial Planning Assumptions (Market Capitalization Weighted Portfolio), mid-year 2026 data update, Table 1 (Expected Inflation Composition) · Assumed long-run CPI inflation: half Canadian historical inflation since 1900, half the Bank of Canada target (PWL Capital, Financial Planning Assumptions, Table 1) · 2.5% · effective 2026-08-17
  4. ↑Bank of Canada — Posted interest rates offered by chartered banks (non-chequable savings deposits, series V80691338) · Interest on uninvested cash — chartered bank non-chequable savings deposits · 0.01% · effective 2026-09-09
  5. ↑CRA line 12100 ("Do not subtract the foreign taxes from your income when you report it"); Guide T4013 T3 slip boxes; Guide T4015 T5 boxes · Distribution characters supplied from T3/T5 boxes: eligible (T3 49/T5 24), other dividends (T3 23/T5 10), interest and other income (T3 26/T5 13, line 12100), allocated capital gains (T3 21), foreign non-business income gross of withholding (T3 25/T5 15) and tax paid (T3 34/T5 16), return of capital (T3 42) · See the source · effective 2026-01-01
  6. ↑Guide T4037, mutual funds — reinvested distributions ("the amount is added to your ACB") · A reinvested distribution is taxable income by character and is added to the ACB of the units received · See the source · effective 1972-01-01
  7. ↑ITA 20(1)(bb) ("advising others as to the advisability of purchasing or selling specific shares or securities... other than a commission") · Investment counsel and management fees are deductible in computing income (line 22100); commissions are excluded and stay in ACB / proceeds · See the source · effective 1972-01-01
  8. ↑PWL Capital — Financial Planning Assumptions (Market Capitalization Weighted Portfolio), mid-year 2026, Table 8 (80/20: interest and foreign dividends 1.33%, Canadian dividends 0.51%, realized capital gains 0.45%), split with Table 7 and Appendix 2 (interest 20% × 3.30%) · Default yearly distributions on a non-registered account, as shares of its value, for an 80/20 portfolio: interest, foreign dividends, Canadian (eligible) dividends and realized capital gains · See the source · effective 2026-08-17
  9. ↑PWL Capital — Financial Planning Assumptions, §8 (composition of returns: distributions by character, the balance as capital gains, 90/10 unrealized/realized) · Every non-registered account pays the default yearly distributions, a twelfth each month on its value, reinvested in the account; its entered return is the total, so the price return is that less the distributions; below the default yield the distributions shrink in proportion to the return, and a return of zero or less pays none. Interest and foreign dividends are fully taxed (no foreign tax credit), Canadian dividends as eligible dividends, realized gains as capital gain distributions · effective 2026-10-12