Fidelity and Vanguard Expect Lower Returns. What It Means for Gig Workers

Most retirement calculators assume stocks return about 10% a year, the long-run S&P 500 average. Two of the largest retirement firms in the country now say to plan for a lot less.

What they are forecasting

As reported by TheStreet, Vanguard's latest outlook puts US stock returns at 4.8% to 6.8% a year over the next decade, a midpoint of 5.8%. Fidelity's capital market assumptions, which look 20 years out with a different method, also land at 5.8% a year for US stocks.

Neither firm is predicting a crash. They are saying the past is not a forecast.

Why the gap matters

$500,000 growing at 10% a year becomes about $1.3 million in ten years. At 5.8%, it becomes about $880,000. That is a difference of over $400,000 from one assumption.

Why gig and 1099 workers feel it more

If you drive, deliver or freelance, there is no employer match to cover a shortfall and no payroll deduction saving for you automatically. Lower expected returns mean the amount you put in matters more than ever.

• •Use a conservative return (5% to 6%) when you plan.
• •Use the bigger accounts open to you. A Solo 401(k) or SEP IRA lets self-employed people save far more than an IRA alone. See [can a 1099 worker have a 401(k)?](/401k-for-1099-workers)
• •Save from every payout, even a small percentage, so contributions do the work returns may not.
• •Run your own numbers in the [gig worker retirement calculator](/tools/gig-worker-retirement-calculator).

*Forecasts are estimates, not guarantees. This article is educational and not investment advice.*