Bad News – You Will ABSOLUTELY Need To Save More To Retire Comfortably

Why you'll need to save more to retire comfortably

Bad News – You Will ABSOLUTELY Need To Save More To Retire Comfortably

This is a guest post by Passive Income Dude at

Hello everyone,

I hate to bring bad news, but there is something going on around you, something you may have missed until now, but it is something we absolutely can no longer overlook as responsible individuals and investors.  If you have a family you are accountable for, or you are planning on ‘big’ retirement dreams for yourself, this article should help you wake up, unfortunately.

I am talking about an environment of VERY, very low investment returns, for quite some time.

Consider these headlines I’ve been seeing recently:

“Prepare for lousy stock and bond returns for years.”
~ CNN Money, July 2016

“We absolutely, absolutely cannot rely on stocks and bonds to produce over the next 20 or 30 years what they produced over the past 30.”   
, April 2016

“Leading investment analysts think you will be lucky to squeeze out an average return of 2% annually, after inflation and fees, from a typical portfolio of stocks and bonds over the coming decade or so.”
~Jason Zweig, Wall Street Journal

And finally,

“Northern Trust is telling clients to expect average stock returns of 5.5% a year, including dividends, for the next five years, well below the historical 9% average. Wilmington Trust is looking for a 6.8% average annual stock gain for the next five years, including 2.6% from dividends. David Kostin of Goldman Sachs is talking about average total returns of 5% a year for 10 years.”
~ Wall Street Journal, Feb 2016

There is near consensus now among major banks and “key individuals” I’ll call them (such as John Bogle, Founder of Vanguard Group), that say you are more likely to get somewhere between 4% and 6.5% a year in real terms.   Bogle specifically says 6% nominal (non-inflation-adjusted) equity returns during the next decade and 3% bond returns.

Ok, you say, low returns going forward…got it.  But do you really understand its impact on your ability to retire and to achieve your financial goals?

Consider the following:

Just to make up for a 2 percentage point drop in average returns, a 30-year-old would have to work seven years longer, or almost double his or her savings rate (from the McKinsey Global Institute).

Seven years longer or double my savings rate?!  And that is only for 2% lower average returns.  If it is say, 4% lower, which is a very real possibility, that equates to 14 years longer of working!

My key point is that “Investors should stare a cold, hard truth straight in the face: Future returns on stocks are likely to be far slimmer than the fat gains of the past few years.”

Consider this graph showing Japan’s stock returns (in the red line) over the last 15 years:

You’ll notice that from 2000 to 2016, Japan’s stock market has returned almost exactly 0%.  This could be a very real possibility for the U.S. market as well.

In closing, I chose the picture at the start of this article intentionally.  It is a baby tree under a few coins.  If we are not careful, our retirement portfolios will not grow much more than that!  Given the length of this article already, I will save further comments for what to do elsewhere on my website and in future articles, but I will close with the following advice that should be heeded immediately:

2) Minimize your fees
3) Consider your new capital allocations very carefully before buying
4) Prepare, perhaps, to have your dividends be the large majority of your total return

What do you think?  I’d love to hear your perspective and comments.

If you would like to know what to do about this situation, and more investing commentary and insights, please visit Passive Income Dude at where I share my journey to financial freedom through my own disciplined dividend and real estate investing.  Thanks for reading!


  1. Thanks Passive Income Pursuit! Great to have fellow investors out there supporting each other. Here's to high future returns someday, cheers,

    Passive Income Dude

    1. I am having some issues with investing right now. I know you cant time the market but I feel like stocks are so overpriced these days. I can not say why these stocks are priced so high, and why the market is at record highs. I am saving but not investing. It is tough sometimes.

    2. PID,

      The markets move in cycles and it'll be interesting to see how many people will actually start investing whenever the future returns are brighter i.e. the markets are in the tank. But that time will come and then move back to the low expected returns again. Wash rinse repeat. Keeping a steady mindset is the best advice I can give to anyone wanting to invest.

      Thanks for the guest post.

    3. LTMilV,

      I completely understand the frustration. There's very few values out there especially among the really high quality companies. JNJ and PEP could be decent if you're near the point where you are sitting on too much cash but there's not a whole lot to like at the moment. Doing nothing and waiting for fat pitches is a valid move to make as well. Just stay focused and looking for values where you see them and don't be afraid to take a swing when you find it. Eventually the markets will give a lot more and a lot better opportunities so you just need to stay patient.

      All the best.

    4. Hey PIP and LTMilV,

      Good thoughts and I agree with Pursuit's comment above completely. I am just concerned that returns will stay depressed for quite some time, to be honest. I even think there is a possibility of low returns for the next DECADE. This is mostly why I decided to pursue rental properties in addition to the stock market, which I talk a lot about on my site and think will greatly increase returns. Great discussion!

    5. PID,

      Being flexible is probably one of the best things you can do. Of course rental properties come with their own set of issues and hassle, but the cash flow can be great.

      The returns if you invested every dollar you had into the market right now might be low for the next decade. But that's not a very likely move for 99% of investors out there. Most people have monthly savings that they invest so they aren't moving big amounts of money. So the future returns only come into play at the time you invest. The markets will move up and move down and the bull can't go on forever. Neither will the bear.

      All the best.

  2. I have no intentions of selling a stock unless its future ability to pay a dividend is gone. So I am looking to accumulate even more shares during a down period where valuations are not so high. Thanks for sharing!

    1. More Dividends, that's a great strategy and one I agree with. I think we may only be able to rely on the income for awhile, which is what I meant in my 'point #4' from the article. At some point however, dividend growth becomes so depressed, which is part of (Gordon's equation at least!) total return, and I imagine you take into account for new capital. We'll see what happens, and thanks for the comment!


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