Some millennials have really upped their game when it comes to saving for retirement: 1 in 6 millennials reportedly have $100,000 socked away, and part of that growth is thanks to the booming market. But that may be about to change.
The economists at investing giant Vanguard predict that, over the next 10 years, annual U.S. stock market returns will likely average between 3 percent and 5 percent. When you factor in inflation — which, luckily, Vanguard predicts will be below 2 percent — the real rate of return is expected to be under 3 percent.
That's "a far cry from the returns investors may have become accustomed to over the last several years,” says Vanguard’s senior economist Andrew Patterson. The S&P 500, a benchmark of 500 public company stocks, had a rate of return of almost 22 percent last year.
You can blame part of the slowdown on strategies employed by the Federal Reserve following the 2008 financial crisis. The Fed pumped billions into the market, buying up bonds and mortgage-backed securities, which in turn, allowed investors to use that money to bid up stock prices. But over the past few years, the Fed has curtailed its spending and started to increase interest rates. Now, with the Fed continuing to draw back, Vanguard expects stock market growth to slow.