In retirement planning one of the inputs to a forecast is an assumption about return on investments... and there are a number of rules of thumb thrown around. 6%, 8%, something that goes from higher to lower the closer you get to retirement age, etc.
What I want to do is look at something like the S&P 500, for which data is readily available, not only to get a compound annual growth rate (CAGR) value for the annual return input, but also to look at volatility.
But what's a good way to incorporate volatility into this?
Since I have approximately 35 years left to invest for retirement, one thought I had is to take rolling 35 year slices of the index and calculate the CAGR for each slice. Then for my forecast use the median rate for my primary assumption on return, but then also forecast using the 25th and 75th percentile rates to give a sense of what the next 40 years could actually look like.
Is there any common way of doing something like this when doing retirement planning?