Bloomberg: The Bull Market Could Ruin Your Retirement

Here’s the good news for many people in their 60s and 70s: The long bull market has fattened retirement portfolios. But after such a long rally, we’ll likely see slowing growth or even a sharp decline in the markets. That, combined with increasing life spans, puts recent retirees in “a really unique and dangerous place,” says David Blanchett, head of retirement research at Morningstar. For retirees who take annual withdrawals from savings, a long stretch of below-average returns early on can make it impossible for a portfolio to fully recover. Even if the market outperforms later, the gain would be on such a depleted pot of savings that it wouldn’t undo the early damage. While trying to time the market is a fool’s game, preparing for a possible downturn as retirement approaches is a smart move; the bull market has been impressive, but it’s not immortal. Consider that since 2009, returns on the S&P 500 index have averaged about 15 percent annually, vs. 10 percent over the past 90 years. After accounting for inflation, Morningstar is forecasting virtually no gains for U.S. stocks over the next decade.