Retirement planning rests on assumptions that can unravel when markets refuse to cooperate. Investors cannot know how long they will live, how much inflation they will encounter, or what stocks and bonds will deliver across roughly 30 years of retirement.
Market returns are among the most important unknowns. Since the S&P 500 launched in 1957, it has produced an average annual return of 10%, according to Fidelity, encouraging many investors to build financial plans around that historical figure.
Past performance, however, does not guarantee future results. Fidelity and Vanguard have both released projections suggesting that US stock returns could fall well short of the familiar 10% average that has shaped the expectations of an entire generation.
In 2026, Vanguard’s 10 year outlook, published in late October, projected that US stocks would deliver average annual returns between 4.8% and 6.8% over the next decade. Fidelity offered an even longer view, forecasting 5.8% returns for US stocks over 20 years.
Major investment firms use different forecasting methods, but their models generally consider valuations, interest rates, inflation, and projected earnings growth. The modest outlooks from Fidelity and Vanguard reflect higher starting valuations, lower growth potential, and frothy market conditions.
These forecasts remain educated estimates rather than certainties. Even research supported by large teams of analysts cannot predict markets perfectly, but similarly cautious projections from two major firms give retirees a reason to reconsider aggressive assumptions, particularly during early retirement.
The difference between 10% and 5% returns can dramatically alter a retirement plan. A $500,000 portfolio compounding at 10% for 10 years would grow to about $1.3 million, while the same amount compounding at 5% would reach around $814,000.
That gap approaches $500,000 even though the starting investment is identical. Retirees who assume double digit gains and instead receive single digit returns could face uncomfortable lifestyle changes if their withdrawals and spending were built around stronger performance.
Preparing for weaker returns can reduce the risk of being caught off guard. Retirees can focus on withdrawal rates, cash reserves, and dependable income sources rather than relying entirely on the stock market to repeat its historical average.
The standard 4% withdrawal rule is designed for long retirement horizons, but a flexible range may provide more room to respond to changing conditions. One approach is to set withdrawals between 2% and 5%, moving toward either end based on the previous year’s market performance.
Such flexibility may help investors avoid draining their portfolios at a steady rate while markets are falling. For people with at least $250,000 in retirement savings, professional assistance may also help determine an appropriate withdrawal rate each year.
WiserAdvisor matches investors with vetted financial professionals based on their savings, retirement timeline, and overall portfolio. The platform can provide up to three matches and allows users to schedule no obligation consultations to evaluate which advisor may suit their longer range goals.
WiserAdvisor is a matching service and does not directly provide financial advice. Its matched advisors are third parties, and specific financial results are not guaranteed.
A cash reserve can provide another layer of protection during a market selloff. Holding enough money in a high yield savings account to cover six months or one year of expenses may reduce the need to sell stocks during a severe decline.
The Wealthfront Cash Account currently offers a base annual percentage yield of 3.55% through program banks. Referred clients can earn up to a 4.55% annual percentage yield through a new client boost and direct deposit incentive.
That yield is nearly 10 times the national deposit savings rate cited in the FDIC’s October report. The account has no minimum balance or account fees, provides withdrawals around the clock and free domestic wire transfers, and offers eligibility for up to $8 million in FDIC insurance through program banks.
Retirees can also place greater emphasis on reliable income sources such as pensions or Social Security. Depending less on stock market returns and more on those sources of retirement cash flow can reduce market exposure during a decade that Fidelity and Vanguard expect to be less rewarding.
No forecast can eliminate uncertainty, and neither firm’s projection is guaranteed. Still, lower expected returns make conservative assumptions, adaptable withdrawals, accessible cash, and dependable income increasingly important for retirees trying to protect their nest eggs.