By Chris Taylor

NEW YORK (Reuters) - Don't look now, but your retirement savings plan may not be as ironclad as you think. It may even include some magical thinking.

That's because every retirement calculator features an "annual rate of return" that savers typically are asked to plug in for themselves. And the hard truth is, no one really knows how well their investments will perform in the future -- and that makes all our detailed retirement calculations seem kind of futile.

But here's something we do know: The good old days, when savers blithely counted on their retirement savings growing 7 percent or 8 percent or even 10 percent, year after year after year, are likely gone. In the New Normal, cautious investors are learning to revise their expectations downward.

People like Louis Berlin, for example. The Miami insurance salesman was one of those who piled into risky assets in the late 1990s, and thought he could rely on hefty annual stock gains.

"I thought those 90s rates of return were going to carry us all through, and then we had a Lost Decade," he says.

After losing hundreds of thousands of dollars in the dot-com bust, he settled on a new rate of return for the future: 3 percent. Or, when he's feeling a little devil-may-care, 4 percent.

"When people start expecting 8 or 10 percent a year, that's when they get into real trouble," says the 58-year-old, who currently keeps about half of his portfolio in equities. "People get carried away on the high side, and when reality hits they're unprepared. Then you have a whole decade of missed returns you have to make up."

REALISTIC OR MAGICAL?

So what's realistic when it comes to portfolio returns, and what's essentially magical thinking? After all, you have to put some number into those retirement calculators, even if it's just a back-of-the-napkin approximation.

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Dangerous magic in your retirement plan