Is the stock market's real long-term return just 2 percent?
May 12, 2013 5:42 AM Subscribe
I was looking around for information on long-term investment planning and I ran across this page
, which says that after adjusting for inflation, long-term stock market returns are only 1.9% before taxes. The whole site seems to advocate this sort of really creepy gold fetishism that's been popping up lately, so my natural reaction is to dismiss it. But I still have doubts, and this plays into my anxieties about whether retirement savings is worthwhile at all. Help me debunk this?
(Existential crisis inside.)
posted by aw_yiss to work & money (28 answers total) 6 users marked this as a favorite
Okay, here's why I care:
At 10% return, retirement accounts just seem immensely practical. I'll have enough of a cushion that sometime in the future I can take a big hit in income and just use Roth contributions to cover the gap. Or (if I'm very, very careful, or the laws change) I could start a SEPP distribution before retirement age.
At 2%, the situation feels absolutely different. Not only will I need every penny of my retirement savings for, y'know, retirement, but non-market risks eat up all of my returns and then some. To start, I'm still at an age where there's a 25% chance I'll just drop dead before I can retire. Current politicians' talk of raising the retirement age increases that risk. And if the Baby Boomers are any indication, there's a definite chance that upon retirement, I'll become a reactionary and donate all my time to the election campaign for Ron Paul's grandson, which – ew. The expectation value of my savings shows such a loss that, God help me, retiring on catfood and government cheese looks almost prudent.
So yeah, I guess, followup question: If the returns really were just 2%, how could I feel more okay about retirement, and not that I'm throwing my money down a black hole?