He told them that they would need to have savings of $500,000 by the time they retire, assuming they both wanted to retire at John's age of 65. They had told him that they both expected to live 25 years in retirement and that they would need $55,000 (in future dollars) per year excluding all savings to date. He gave them the following information regarding investments he could make for them:

Beta Return

Canadian Index Fund 1.0 International Income Fund 0.8 Canadian Growth Fund 1.2 Canadian Aggressive Fund 1.8

10.2% 8.5% 11.1% 13.0%

The year that the returns were quoted for the market returned 10.2% and the T-bill rate was 4.8%. The advisor also suggested they consider buying a real return bond. The bond had a 4% real coupon rate.

 

What rate the financial planner was assuming when he told them when he told them how much they would need to have saved for their retirement ?