Will Low Returns Ruin Your Retirement? (How to Interpret Goldman Sachs 3% Forecast) | Root Talks

What if the next 10 years bring just 3% returns from the S&P 500?
In this episode, we turn that forecast into a real-world retirement plan—not panic. You’ll learn how to stress test your portfolio, build flexibility into your spending, and design a withdrawal strategy that can survive tough markets.

Listen as Ari and James break down:
Sequence-of-returns risk — why bad early years hurt more than bad averages.
The modern 4% rule — how to use it as a guardrail, not a guarantee.
Diversification that actually works — adding small caps, value, international, and bonds to reduce risk from overexposed tech-heavy portfolios.
Tax-smart moves — Roth conversions, cash buffers, and dynamic withdrawal rules that adapt to changing markets.

Whether you’re planning to retire early or just want peace of mind through an uncertain decade, this guide gives you a clear, flexible framework—so your lifestyle isn’t dictated by Wall Street’s forecasts.

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Advisory services are offered through Root Financial Partners, LLC, an SEC-registered investment adviser. This content is intended for informational and educational purposes only and should not be considered personalized investment, tax, or legal advice. Viewing this content does not create an advisory relationship. We do not provide tax preparation or legal services. Always consult an investment, tax or legal professional regarding your specific situation.

The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

Comments reflect the views of individual users and do not necessarily represent the views of Root Financial. They are not verified, may not be accurate, and should not be considered testimonials or endorsements

Participation in the Retirement Planning Academy or Early Retirement Academy does not create an advisory relationship with Root Financial. These programs are educational in nature and are not a substitute for personalized financial advice. Advisory services are offered only under a written agreement with Root Financial.

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Ari Taublieb, CFP ®, MBA is the Chief Growth Officer of Root Financial Partners and a Fiduciary Financial Planner specializing in helping clients retire early with confidence.

Chapters

• 0:00 Family, Fears, And Early Retirement
• 0:50 Goldman Sachs’ 3% Forecast Question
• 2:30 Why Predictions Fail And What To Do
• 4:20 Stress Testing: Worst-Case Thinking
• 5:15 The 4% Rule As Floor, Not Target
• 9:50 Should You Delay Or Adjust Spending?
• 12:19 Sequence Risk And The Great Depression
• 14:17 Final Thoughts and Disclaimer

Transcript

SPEAKER_01: 0:00

James, just before we started recording, we were talking about family. And I'm recently married and there's talk of children. Who knows exactly when? You have two children at the moment. I imagine a lot of people listening right now, there might be some grandchildren on the way, but that's maybe not the only thing you're thinking about. If you are thinking about an early retirement or retirement at any time, there's probably a small part of you going, well, what if my returns don't do what I expect them to do? How will that change my retirement? And the last thing you want is for your returns to not maybe do what you hope. And now your grandchildren, maybe you can't support them to the degree you want. Or worst case, you have to go back to work, which we certainly want to avoid. So today's topic has actually been brought by a comment on YouTube. So for those of you who are leaving comments on YouTube, thank you, because that is how we actually decide what we talk about today. And I'm gonna go ahead and read that comment now. So this comes from UT Savrati, who says, What's your perspective on the recent strategy paper from Goldman Sachs stating, we estimate the SP 500 will deliver an annualized nominal total return of 3% during the next 10 years. Goes on to add some more context there, but he says would be great to see a video with perspective. Even with the diversified portfolio, the idea of retiring early at 48 is scary. Thoughts on that, James?

SPEAKER_00: 1:23

That's what a segue. You open that up with uh Grant. Like, where on earth is already going with this? But okay, you came back to the returns. I do have thoughts on that. That's any the sometimes we fall into this trap of thinking that financial planning is like it can be boiled down to a science and it can be boiled down to an engineering problem. If you get the right inputs, you put them together the right way, the outputs are gonna take care of themselves and you're gonna be good. And there's some areas where you have more control over the inputs and the outputs than others, but one of the areas that you have very little control is the returns. And it doesn't take a genius to understand that if you retire and you have really, really poor returns, your retirement might look a whole lot different than what you expect it would have. And so um, this particular individual's reference in a study by Goldman Sachs. Every major fund company, it seems like has done one of these studies. And I do have a few points to, I guess, come up with this. Number one, I've been hearing this for years. Year after year after year after year, low returns going forward, low returns going forward, low returns going forward. Everyone from Goldman Sachs to Vanguard has said that. Very well-respected institutions. This isn't me saying they don't know what they're talking about. This isn't us saying we know better than they do, but it is us saying no one has any idea, is the first point I'll make to this. Is no one has any idea what the next 10 years are going to look like. How on earth could we? Look at all that's going on with AI, look what's all going on in the market, how is that going to unfold? I would be wary of relying too heavily on one or even all of these research papers or studies that try to predict that. Number two, though, like there is, I think, a lot of good that can come from planning from worst case scenario. What would it look like had that happened? Um, what are you gonna be okay if you retire at 48 and if you get suboptimal returns? What do you think about there? And I think that's a great, that's that is what you should be doing with planning. If your financial plan is based upon you're gonna get the same 15-20% annual returns that the NASDAQ's been generating over the last 10 plus years, you're probably in for a rude awakening when you realize that this last five to 10 years, 15 years even, has been wonderful. And there'll probably be other time periods in the future where you get similar returns, but that is in no way gonna be something you can plan for every single year. And so run projections of what might you be able to do if you get normal market returns that you've gotten, you know, the SP historically has generated about 10% per year. That's just what it's done. Inflation's been about three. So your real return's been somewhere in the neighborhood of seven. Had you just invest in the S P 500 over the last 100 years. Run a projection like that just to see where you will end up. But run a projection too of what if your real return's 4%? What if your real return is 1%? And by real return, I mean your nominal return. So when you look at your investment statement and see I'm up 4%, 5%, 6%, whatever it is, minus whatever inflation is. Because if your nominal return is eight, but inflation's 10 every year, just to use an extreme example, eight seems like a good return until you realize you actually losing 2% per year every year to inflation. So run those different scenarios, stress test that. I think that's what we'd like to look at of don't just run a plan of what happens if these inputs are right. Run a plan of base case, here's the inputs I think will happen. What if expenses are way higher? What if Social Security gets cut? What if uh inflation is way higher? What if returns are way lower? What if tax rates go up? What if you have medical expenses in excess of X? What if you have a long-term care event? What if, what if, what if, and I think that's a big part of planning is we don't know. And it cannot be boiled down to a science. But what we can do is adapt. And I think that, you know, I had Bill Bangin, who's the author of the original 4% rule white paper on the show a few weeks back. And people have heard of his rule, the 4% rule. And they think of it as this sense of, oh, 4% that goes for me, that goes for Ari, that goes for anyone who wants to retire. 4% is what you can take. And no ifs ands buts about it. That's just it. Well, the reality, and he was quick to point this out, that's worst case scenario. That's if you retired, if you were the unluckiest retiree and you retired right before you had a prolonged period of negative, of really poor returns, much like this viewer saying. What if you got that Goldman Sachs study environment? What if you retired right in 1973, 1974, where you had horrible market returns and you had horrible inflation at the same time? What if you retired right when the Great Depression hit? So when he's saying 4% rule, what he's saying is what that's what you could have taken even under these circumstances, even under these worst-case scenarios, at least historically speaking. Now we don't know what the future is going to hold. So things theoretically could be worse, but what we're trying to do is we're trying to block predict what the future will be. And there's just no way of doing that. So we do need to look at a range. And if you run a range of returns, and if you look at some of these lower return environments and it leads to a retirement that you're just not okay with, that begs the question. Do you retire at 48 or do you continue going another couple of years to build in some margin of safety? Do you retire at 48 and spend what you want to spend? What's your backup plan if returns are low? What's your backup plan if you need to go back to work? What's your backup plan if things don't go the way you want them to go? And that's really where the beauty of planning is, not in the predictions, but in the what-ifs and the what are we going to do when an event like this happens?

SPEAKER_01: 7:07

Great points. They remind me of a client story. But before I tell the quick story, I imagine all of you are thinking one of two things. Number one, you're thinking the greatest fear that I have is I retire early and run out of money. The second fear is you actually invest so well, don't enjoy your retirement to the fullest. Look back being 85 years old, mad at James and mad at me, going, Why didn't you guys tell me I should have spent more when I was in a fine spot to do so? And that balancing act is what we obviously help clients with. So the story that I'll share here that I think directly relates to your great points there, James, is I had a client who was really feeling down on themselves. And I remember talking to them saying, Hey, why do you feel down? And they said, Well, this is the first year I'm not gonna max out my 401k. I said, Okay, tell me why. And they said, Well, I lost my job and so I could do it, but I really would not be able to go out to eat. And they'd already saved and invested well. But you could tell that no matter what, they felt like they were off. They were not on track for retirement because it was their first year where they weren't maxing out their 401k. And I said, Can I give you some very transparent advice? And they're like, of course we need it, expecting me to say, you're gonna have to figure it out. I don't care if you don't get to go out to eat, you gotta max this thing out or you're not retiring. And I said, it doesn't really matter to me as an advisor if you save more. They said, that's really weird considering you're a financial advisor. Isn't that like what you tell people to do? I said, well, think about it like this. If you have a million dollars and you get a 10% rate of return, that's significant. I mean, that is legitimately$100,000 of value added. What's the most you can put in your 401k? And they said, well, I don't know, 30,000 or something like that. I said, well, you see how we cannot outsave good investing? They said, yeah, but what if I don't get 10%? I go, let's do it with 7% or 6% or 5%. And they finally, I could see, put their shoulders down a little bit, going, okay, all that work I was doing that felt like autopilot, I'm seeing the benefits of now. And their child was on that meeting. And their child, I could see, was focusing on returns. And I went to the client and I said, Hey, do you mind if I speak very transparently to your child right now? And they said, Of course. And I said, I need you to shut up. And they're like, oh my gosh, how dare you ever talk to me that way? The parent and I were cool with it, James. So the parent goes, Why did you say that? I go, Well, they're just focusing on Bitcoin and getting max returns, but they have a hundred dollars in their 401k. 10% on a hundred dollars is 10 bucks. It's not making a big difference. They need to max out their 401k, not you, because you're in a different stage of life. Now, I said it much nicer than that, and we were all cool, but it was giving this client a wow. So, yes, I need to plan. I need to run what if scenarios, but I have invested well. And this idea of being kind of forced in my head to max out my 401k maybe isn't the right answer. That was surprising for the first time.

SPEAKER_00: 10:00

Yeah, it's a it's a good point. There's there's a couple different lessons here. One is almost like what's carrying the heavy lifting? Is it contributions or is it investment returns? And at different phases of your invest in lifetime, that's gonna be different. Early on, contributions matter way more than returns. Later on, contributions aren't gonna do as much of the heavy lifting as returns. So that's definitely a point. Here, so I'm gonna go back to what this listener mentioned real quick. And I'm just gonna give you numbers and tell me how you're feeling. Okay, all right, you're about to retire. So put yourself in this individual's shoes. 48 years old, you're about to retire, and you know for certain that next year the market's gonna be down eight and a half percent. Okay, so so you how how are you feeling so far? One word. Good, bad, fine. Scared. Scared. Okay, cool. That's one year. The year after, you're gonna be down 25%. How are you feeling now? Trying. The year after, you're gonna be down 43%. And keep in mind, alright, before you give me your one-word answer, how are you feeling? These are consecutive returns. So a negative on a negative on a negative, how are you doing after those three consecutive years of returns? Work. Should I go back to work? And then finally, year four, you're down eight percent. How are you doing right now emotionally? Destroyed. Destroyed. Those aren't arbitrary returns, those were the four consecutive returns had you retired in 1929, right before the Great Depression hit. That is what the US market did. Those are devastating returns. Those are the returns that when people talk about that when Bill Bangin writes his paper of you can spend a certain amount, it's not you can spend a certain amount only if you get 10% per year average in the stock market, or only if you get 5% per year average return in the stock market. He is taking these horrible times in the market, these really, really, really bad times in the market and saying, what if you retired and that was your experience? Could you have followed this? Could you have spent this amount and still had your money last for 30 plus years into retirement? So when we go back to this, Great, I can't think of a much worse time to retire than the Great Depression. When you think about how much devastation that caused, when you think about the fear that that caused, when you think about how long it took to break even. By the way, there are some statistics on that that are a little bit misleading. When you look at how long did it actually take for the market to break even, it was about 14 years. You know, you hear some people talk about it as 25 plus years until the market actually fully recovered. That's if you didn't reinvest dividends, that's if you did a few different things. There's also horrible deflation during that time. So the actual break-even time was about nine years when you look at your inflation-adjusted returns of what you were getting. But still hard to imagine a worse scenario than that. And so as I bring that back to these studies today, what if this Goldman Sachs study is right? What if these vanguard studies are right? What if any of these studies are right? That's not necessarily changing what our feedback to clients is sometimes that you can be in a position to retire if you're invested the right way and have a reasonably high chance of success. Then the final thing that I'll say to that is all these studies are just focused on SP 500. They're just focused on U.S. returns. If you look at the returns of the US stock market over the last 15 years, they've been astronomically high. At some point, there is going to be what you call a reversion to the mean. You just cannot sustain this high of returns forever. We saw this in 2000 to 2010. The returns of the SP 500 were negative. If you looked at January 1st of 2000 to January 1st of 2010, you lost money if you were all invested in the SP 500. So people will hear that and say, I don't want to retire in a time period like that. Well, of course, nobody does. But if you had the right mix of investments, if you had small company investments, international investments, emerging markets investments, small company investments, like all these things made money, which goes back to the point of diversification always being important, but especially as you're approaching and going into retirement. If you're listening to this and you're that investor that has all of your money in QQQ and VTI and the SP 500 and maybe Apple and Nvidia and Amazon, these things have performed so well. I'm not going to give you investment advice, but I would be very cautious of retiring with all of your money in just those types of investments because what has gone up can come down, will come down in many cases. And diversification seems like such a boring thing over those last 15 plus years when all you had to do is choose US large tech stocks and you did insanely well. If you're positive that's going to last forever for the next 40 plus years of your retirement, I'm not sure I would stay invested that way as you go into retirement. So you cannot overstate the importance enough of being diversified, of having the right investment strategy going into retirement. It's always important, but especially important as you approach those retirement years.

SPEAKER_01: 15:10

Very well said. Thank you as always for listening.

SPEAKER_00: 15:13

James, anything you want to add on to that? No, I think that's it. We don't know where the market's going. We don't know what returns are going to be. But if you plan, if you're dynamic, if you're continuing to monitor this along the way, I don't want to say no reason to fear because we should always be cautious. But a well-designed plan should be able to allay a lot of those fears.

SPEAKER_01: 15:33

Love it. If you are listening right now on the podcast app, these episodes are going to continue to go out bi-weekly. And then if you would like to see us actually interact, those are on YouTube on our Root Financial YouTube channel. James has his own channel, James Cannol, as well as mine, Ari Taubleb, on YouTube as well. Thank you guys as always for tuning in. And please do drop comments below of what you'd like to see us address in a future episode.