Article for Reference: https://nypost.com/2024/10/21/business/goldman-sachs-forecasts-sp-500-returns-of-just-3-over-next-decade

Goldman Sachs—a firm that manages billions of dollars and employs some of the brightest economic minds—recently projected that the S&P 500 will return an average of just 3% annually over the next decade.

Their best-case scenario? 7%.

Their worst-case? A measly 1%.

My dad leaned back in his chair, arms crossed, and shook his head. 

“So, you’re telling me I could risk losing money for the chance to make 7%?"

I nodded. “That’s what Goldman Sachs is saying.”

What’s Driving This Market Forecast?

Goldman Sachs isn’t just pulling numbers out of thin air. Their analysts use a metric called the cyclically adjusted price-to-earnings ratio (CAPE) to assess whether the market is overvalued. Right now, the CAPE ratio is at 38, which places it in the 97th percentile of historical valuations.

In simpler terms? The market is more expensive than it has been for nearly all of history—and when stocks start from a high valuation, the probability of strong future returns decreases.

This doesn’t mean stocks can’t go up, but it does mean that if history is any guide, we’re more likely to see below-average returns over the next decade.

Breaking Old Habits: The Risk for Retirees

I could tell my dad was hoping there was better news coming. After all, the past decade has been incredible for investors, averaging 13% per year in market returns. But here’s the catch: those returns came after a historic crash—the Great Recession.

Now, we’re in a different reality. The danger isn’t just that the market might return less—it’s that many retirees are expecting the same level of returns that we’ve seen in the past, and they may not adjust their strategy until it’s too late.

These types of predictions aren’t the end-all-be-all, but they can’t be ignored either.

The biggest risk is that people just keep doing what they’ve been doing—because it worked in the past—without considering that the future may not look the same.

My dad thought for a second, then asked a question that cuts to the heart of the issue:

“What happens if this prediction turns out to be right, and I don’t do anything?”

And that’s where the real problem lies.

The 4% Rule and the Market Rollercoaster

Many retirement plans are based on the 4% rule, a strategy that suggests you can safely withdraw 4% of your retirement savings per year without running out of money. But here’s the issue:

If market returns only average 3% over the next decade, the math simply doesn’t work. Retirees who continue withdrawing 4% will outpace their returns, causing their nest egg to shrink faster than they planned.

And let’s be clear—getting to that 3% average won’t be a smooth, steady ride. It will be a rollercoaster of market highs and lows, meaning that some years could bring significant losses. For retirees, this kind of volatility can be tough to stomach.

My dad thought about that for a second. “So even if I do end up getting 3% per year, I might have to watch my portfolio drop 20% in the meantime?”

“Likely,” I said.

And that’s when he said something that stuck with me:

“I just don’t see how it makes sense to risk losing money for a shot at making 7%—especially when I can lock in a fixed 4% return right now.”

Weighing the Best- and Worst-Case Scenarios

Ultimately, it all comes down to how much risk you’re willing to take.

Let’s break it down:

• Best-case scenario (according to Goldman Sachs): The market returns 7% annually over the next 10 years.

• Worst-case scenario: The market returns 1% annually over the next 10 years.

But neither of those outcomes will be a straight line—there will be ups and downs, bear markets and rallies. And for retirees, the bigger question isn’t just what the average return will be—it’s whether they can afford to take the ride.

For my dad, the answer was pretty clear.

“If I can lock in 4% now, I know what I’m getting. I don’t have to worry about crashes, corrections, or recessions throwing off my retirement plans. I get my check every month, and I sleep easy.”

And honestly, it’s hard to argue with that.

The Importance of Re-Evaluating Your Strategy

No one can predict the future with certainty. Even Goldman Sachs, with all their data and expertise, acknowledges that these are estimates. But their forecast is based on solid reasoning—high valuations tend to lead to lower future returns, and history has shown this pattern repeatedly.

For retirees, the key takeaway is this:

• The past decade was exceptional, but the next decade may not look the same.

• Relying on old habits—like assuming 10%+ market returns—could be risky.

• If Goldman Sachs is right, retirees who don’t adjust now may run out of options later.

That doesn’t mean abandoning the market altogether—it just means taking a step back and asking - Is this level of risk still worth it? For my dad, the answer was no. And for many retirees looking for security and peace of mind, he may not be alone in that thinking.

Final Thoughts: A Retirement Built on Certainty

If you know the story of Grand Vision Bond Partners, these are the types of concerns GV Bonds were designed for.

I have a lot of talks about finances with my dad. I wish they were always filled with great financial news, but that just isn’t the way the world works. The reality is that people who saved for decades need to make decisions about how to best protect what they’ve built.

GV Bonds was built specifically for people like my dad. I remember hearing his retirement plans when he was diligently saving his nest egg. He wasn’t just saving numbers on a statement—he was saving for the future he envisioned.

Nothing makes me happier than seeing him enjoy this time in his life without worrying about whether his nest egg will last. He doesn’t have to stress over market swings, bear markets, or whether he needs to adjust his withdrawals every time the economy shifts. He saved for this moment, and now, he gets to live it.

We know GV Bonds may not be for everyone, and that’s okay. But nothing brings us more joy than being able to offer that security and peace of mind to people like my dad—people who don’t feel like riding the market rollercoaster in retirement and just want to rest easy when they lay their heads down at night.