![\"How](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/09\/im-31913821_1757084145318.jpg\" "\\"How")
<\/p>\nThe S&P 500 is up 11.5% so far this year. Over the past decade, the S&P 500 has returned an average of 15% annually, far in excess of its long-term annualized return of 10.3%.<\/p>\n
The obvious worry is that stocks have become extraordinarily expensive. The more subtle concern is that a booming stock market breeds complacency.<\/p>\n
Huge returns make a comfy retirement for everyone seem within reach, without effort or sacrifice. And that\u2019s a dangerous delusion.<\/p>\n
With indexes at record highs, it\u2019s the perfect time to remind yourself that saving for your retirement isn\u2019t the stock market\u2019s job. It\u2019s yours.<\/p>\n
Whether you have decades of working ahead of you, you\u2019re nearing retirement or you\u2019re already retired, you\u2019re probably going to need more money to sustain you in your post-working years than you think.<\/p>\n
That will be especially true if, as history suggests, high current stock prices lead to lower future returns. What if performance dwindles? Retirement savers who took high returns for granted and didn\u2019t save enough may face a severe shortfall.<\/p>\n
But returns are only one side of the coin. The other is spending.<\/p>\n
It\u2019s widely believed that people spend less in retirement than when they were working. One popular rule of thumb is that you will have to cover only 70% to 80% of your pre-retirement spending. (Another version says you will need to replace about the same amount of your pre-retirement income.)<\/p>\n
That\u2019s nonsense, according to researchers Edward McQuarrie and William Bernstein, who are writing a book with the working title \u201cHow Much You Must Save to Retire.” Several studies have shown that, on average, people spend around 93% to 97% as much in retirement as they did when they were working.<\/p>\n
Those who spend less do so not because they can, but because they must\u2014because they didn\u2019t save enough.<\/p>\n
The wealthier, on the other hand, may even spend more in retirement than they did while working.<\/p>\n
Dan Foote, who turns 65 next month, can vouch for the steady state of spending. Foote is a former commercial banker who retired 10 years ago. While he was working, he imagined that his household\u2019s spending would decline when he retired\u2014especially after moving from pricey suburban New Jersey to the lower-cost Columbus, Ohio, area.<\/p>\n
\u201cThat\u2019s not how it worked out,” says Foote. \u201cI don\u2019t commute or buy suits, but I have more time on my own to spend money. I think we spend the same [as during the working years].”<\/p>\n
Fortunately, adds Foote, because the stock market has boomed in the past decade, \u201cour net worth today is higher than it was seven or eight years ago.”<\/p>\n
But what if the stock market doesn\u2019t boom? What if it busts? In recent research analyzing returns back to 1793, McQuarrie looked at all 30-year periods lagged monthly (starting with January 1793, February 1793 and so on) through the end of 2023.<\/p>\n
In 160 of those more than 2,400 three-decade periods, annualized stock returns averaged less than 3% after inflation. In 302 of the 30-year periods\u2014an eighth of the total sample\u2014stocks gained an average of less than 4% annually after inflation.<\/p>\n
That might sound pathetically low to you. It isn\u2019t. The average since 1793 is 6.1%.<\/p>\n
If you expect to work for 30 years and be retired for 30 years, says Bernstein, \u201cyou\u2019d better save a truckload of money\u2014and you\u2019d better be lucky.”<\/p>\n
Over the three decades ended in December 2023, U.S. stocks returned an annualized 6.9% after inflation. Over the 360 months ended in July 1982, however, they earned only 4.7%. And in the 30 years ended May 1932, stocks gained only 0.9% annually after inflation.<\/p>\n
If a portfolio of stocks, bonds and other assets earns a 5% annualized return after inflation, you would need to save nearly 12% of your pretax income for 30 working years to sustain a constant level of spending through a 30-year retirement.<\/p>\n
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\t\t\tHow to Keep This Hot Stock Market From Melting Your Retirement Dreams <\/p>\n
At a 4% real return, you\u2019d have to save more than 15% of your pretax income, according to McQuarrie and Bernstein. If your portfolio earns 3% after inflation, you\u2019ll have to save nearly 21% of what you earn for 30 years.<\/p>\n
Even if you work for 40 years and retire for only 20, you\u2019d have to save 10% of your income to sustain your spending if your portfolio generates a 3% net return.<\/p>\n
As many analysts\u2014and retirees!\u2014have pointed out, retirement tends to sort itself into three approximate phases: go-go, slow go and no go. In the go-go years, typically in your late 60s and early 70s, you\u2019re in frequent motion, focusing on fitness, hobbies and travel. From your mid-70s to mid-80s, you might find less strenuous ways to savor life. In your 80s or 90s, you\u2019ll likely be much less active.<\/p>\n
The resulting pattern of retirement spending is high in the go-go years, lower in the slow-go years and often higher in the no-go years.<\/p>\n
What investors must never forget is that market returns also have three basic phases: good to great, middling and miserable. To counteract the consequences of miserable long-term returns, you have only three choices: Save more, work longer or take more risk.<\/p>\n
Saving more is by far the easiest and safest.<\/p>\n
Write to Jason Zweig at intelligentinvestor@wsj.com<\/p>\n","protected":false},"excerpt":{"rendered":"The S&P 500 is up 11.5% so far this year. Over the past decade, the S&P 500 has…\n","protected":false},"author":2,"featured_media":400758,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3091],"tags":[138315,51,138316,2441,3397,14413,977,16,15],"class_list":{"0":"post-400757","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-average-annual-returns","9":"tag-business","10":"tag-inflation-adjusted-returns","11":"tag-markets","12":"tag-retirement-savings","13":"tag-sp-500","14":"tag-stock-market","15":"tag-uk","16":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115153361358166991","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/400757","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=400757"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/400757\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/400758"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=400757"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=400757"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=400757"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}