Fidelity and Vanguard present the same sobering 10-year outlook – and America’s retirees stand to suffer the most. Protect your nest egg

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Retirement planning is often based on several assumptions.

There is simply no way to predict how long you will live, the level of inflation you will experience during retirement, and what the stock and bond markets will do over that same time period.

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So you just have to plan for about 30 years based on well-informed guesses.

One of these variables concerns market returns. Most retirees look at historical stock market returns and expect a similar return during their retirement years. Since its launch in 1957, the S&P 500 has generated an average annual return of 10%, according to Fidelity (1). An entire generation has probably used this 10% assumption to design all of their financial plans.

However, past performance is no guarantee of future performance. In fact, both Fidelity and Vanguard have issued future forecasts for the stock market that look much less attractive than the 10% average.

Here’s why American retirees should pay close attention to these sobering predictions.

Future outlook

Large investment companies use different methodologies to forecast long-term stock returns, but they generally focus on similar factors such as valuations, interest rates, inflation and earnings growth projections.

In 2026, two of the largest companies have long-term forecasts significantly lower than the historical average of 10%. Vanguard’s 10-year outlook (2) released in late October suggests that U.S. stocks will generate an average annual return of between 4.8% and 6.8% over the next decade. And Fidelity’s forecasts hold up much longer. The company released a 20-year forecast (3) with expectations set at 5.8% for U.S. stocks.

Reasons for the modest forecast include higher starting valuations, lower growth potential and frothy market conditions.

To be honest, none of the companies on Wall Street have a crystal ball. An educated guess, based on rigorous research by an army of analysts, is still just a guess. Still, these cautious sentiments from Wall Street heavyweights should temper some of your own expectations about market returns, especially if you’re retiring early.

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