Your Investing Expectations Are Roughly Double the Reality — How to Plan Around the Gap

Why the Expectation Is So High

The honest answer is that the recent past has been very, very good. From the March 2020 COVID bottom through mid-2026, the S&P 500 returned roughly 130 percent cumulative — close to 17 percent annualized. Anyone who has been investing for that window, and whose first exposure to markets was the post-COVID recovery, has a reference point that is wildly unrepresentative of what a 30 or 40 year career will actually look like.

Compounding that, retail brokerage apps have spent five years gamifying returns, splash notifications, and confetti on big days. A generation of investors has been trained to associate investing with upside and to discount the long, dull stretches where portfolios do nothing for months at a time. The 17 percent post-COVID number is real but it is not normal. Long-term real returns above 10 percent annualized are exceedingly rare in the historical record.

The third driver is arithmetic confusion. People hear that the S&P 500 has averaged about 10 percent and translate it as “my account will grow 10 percent every year.” In reality, the 10 percent average includes years of negative returns, years of 30 percent returns, and years of nothing. The path is jagged. The average is smooth. Planning around the average without planning around the path is how investors get blindsided when a bad year shows up after three good ones.

What the Gap Actually Costs

Run the math on a $100,000 portfolio, no further contributions, 30-year horizon, two different return assumptions:

• At 7 percent nominal: ends at roughly $760,000. Real, after 2.5 percent inflation, about $367,000.
• At 15 percent nominal: ends at roughly $6.6 million. Real, after inflation, about $1.5 million.

The 15 percent outcome is roughly 8.7 times the 7 percent outcome. Both numbers are plausible over a 30-year window if you choose your starting and ending valuations carefully. Most institutional forecasters believe something close to 7 percent is the realistic central case for the next decade. Believing 15 percent means under-saving today and being forced into painful catch-up decisions later — or discovering at age 62 that you are not where you thought you would be.

How to Plan Around It Honestly

Four levers move the outcome: how much you save, how long you stay invested, what return you assume, and how much risk you take. If the return assumption has to come down, the other three have to come up. There is no way around it.

1. Save more, starting now. A 1 percent increase in savings rate, compounded for 30 years, is worth more than a 1 percent increase in expected return. This is the only lever you control completely.
2. Extend the horizon if you can. Three additional working years roughly doubles the compounding. This lever is often the cheapest if you have flexibility.
3. Plan to a realistic number. Build your retirement projection off 6 to 7 percent nominal, not 12 to 15 percent. If you end up with more, that is a pleasant surprise. If you end up with less, your plan still works.
4. Accept more risk only if you understand it. Chasing return by concentrating in growth or thematic bets is how retail investors turn realistic plans into disappointed ones. Diversification is the boring choice that quietly delivers.

Calibrate Your Numbers Once a Quarter

The most dangerous number in your financial plan is the one you made up three years ago and never updated. The fix is a 10-minute review every quarter that compares your actual portfolio performance against your assumed return.

Three formulas cover it:

• =IVS_BROKERAGE("value") — your current total portfolio value across every connected brokerage.
• =IVS_BROKERAGE("costBasis") — your aggregate cost basis across all accounts.
• =IVS_BROKERAGE("gainLoss")— your unrealized P&L. Divide by cost basis and you have a return-on-cost figure.

Compare that figure against your assumed return. If you assumed 12 percent and you are tracking 8 percent after two years, recalibrate the plan now — not five years from now when the gap has compounded into a real problem.

The investors who finish their careers with the right number are the ones who let reality update their assumptions every quarter. The ones who finish disappointed are the ones who held on to a number that felt good when they wrote it down.

The Honest Takeaway

Markets will probably deliver somewhere between 6 and 10 percent nominal over the next decade, depending on starting valuations and what happens to inflation and rates. That is a fine number. Compounded over a working career, it builds real wealth. The mistake is treating 6 to 10 percent like 15 percent, building a plan on the wrong number, and discovering the gap at the worst possible time.

Plan honestly. Save aggressively. Diversify broadly. Track the real numbers in a single sheet. The boring approach is the one that works.

Plan on Real Numbers, Not Headlines

Connect Fidelity, Schwab, Robinhood, and 35+ brokerages. Read-only access. AES-256 encrypted. See your real portfolio value, cost basis, and gain-loss in one Google Sheet — the inputs you need to plan around actual returns, not the number in your head.