Fidelity and Vanguard warn US retirees of lower 10-year stock returns
Major investment firms Fidelity and Vanguard have issued cautious long-term forecasts for US stock returns, significantly below the historical 10% average. Vanguard projects 4.8% to 6.8% annual returns over the next decade, while Fidelity expects 5.8% over 20 years. These lower projections stem from high valuations and reduced growth potential, potentially impacting retirees who relied on higher historical averages for their financial plans.
Key points
- Vanguard’s late October 2026 outlook projects US stock returns between 4.8% and 6.8% annually for the next decade.
- Fidelity’s 20-year forecast anticipates an average annual return of 5.8% for US stocks.
- The S&P 500 has historically delivered a 10% average annual return since 1957, a figure many retirees used for planning.
- Lower forecasts are attributed to higher starting valuations, lower growth potential, and current market conditions.
- A $500,000 investment growing at 10% for 10 years reaches $1.3 million, whereas at 5% it reaches only $814,000.
- Experts suggest using flexible withdrawal rates, such as a 2% to 5% range, rather than a fixed 4% rule.
Background
This briefing follows earlier coverage of market volatility and retirement planning strategies. The current forecasts from major firms contrast with the historical 10% return assumption that has shaped retirement planning for decades. While past performance does not guarantee future results, the new projections highlight the need for adjusted financial strategies among US retirees.
Why it matters
The divergence between historical averages and new forecasts could significantly impact retirement savings. Retirees relying on higher return assumptions may face shortfalls, necessitating adjustments in withdrawal strategies and portfolio diversification to ensure financial security over a 30-year retirement horizon.
What to watch
Retirees are advised to review their withdrawal rates, establish cash buffers, and consider professional financial advice. Monitoring market conditions and adjusting investment strategies based on performance can help mitigate the impact of lower returns. Additionally, exploring stable income sources and high-yield savings options may provide a safety net against market underperformance.
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