How retirement savers should prepare for the end of the bull market

The image shows a pull figure that indicates a bullish market. T. Rowe Price says investors should expect lower returns over the medium term.

In 2022 the S&P 500 had its worst annual first half in five decades. As the tailwinds that propelled global economies during the pandemic recovery have dissipated, those saving for retirement will need to take several steps to counter falling stocks and bond yields, including adding more equity-oriented assets to growth in their portfolios, according to T. Rowe Price’s 2022 US Retirement Market Outlook.

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Because investors can expect lower returns

The image shows a woman looking out of a window.  T. Rowe Price says investors should expect returns in the coming period to be lower than in recent years.

The image shows a woman looking out of a window. T. Rowe Price says investors should expect returns in the coming period to be lower than in recent years.

Despite the economic turmoil caused by the COVID-19 pandemic, the stock market soared in 2021 to new highs after the massive sell-off in March 2020. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite climbed to all-time highs seasons amid vaccine distributions and increased economic activity.

The stock market’s recent run comes on the heels of the longest bull market in history, which ran from 2009 to 2020. Since 2009, the S&P 500 has only had one losing year for total returns (2018). In fact, the index has posted total annualized returns of more than 15% in seven of those 12 years. The index, which tracks the performance of 500 large public companies, rose more than 25% in 2021.

But the T. Rowe Price report, which was issued in the fall of 2021, warned of less robust returns.

“We believe interim returns will be lower than those seen in previous periods – in some cases significantly lower. This has significant implications for pension plans and who they benefit from,” the company said in its report.

The financial services firm first pointed to fixed income markets and near-historically low interest rates – now being raised by the Federal Reserve. This is a trend the company expected to continue. As for equity markets, “We expect returns in many major markets such as the US to be subdued relative to recent history,” he added. “While valuations across asset classes vary and some assets are attractively valued, most asset valuations are elevated by these measures.”

Finally, T. Rowe Price pointed to several risks facing markets, including inflation – which was at a 40-year high in June 2022. While fiscal stimulus, earnings growth and economic activity have contributed to the pandemic recovery, inflation fears were evident in late 2021. In October 2021, for example, the Consumer Price Index for all Urban Consumers rose 6.2% compared to 12 months earlier, the largest increase since 1990.

The risks extend beyond US markets. The T. Rowe Price report noted that China is facing supply chain disruptions and rising commodity prices. Elsewhere, virus mutations and vaccine availability challenges may also hamper investment returns.

“While the global economy has been buoyed by a period of extreme liquidity driven by fiscal and monetary stimulus, these tailwinds are likely to fade as central banks begin to pursue more accommodative policies,” the report said. “While these conditions may not materialize as significant headwinds to growth, we believe they contribute to a less compelling risk/reward profile going forward. Retirement investors should position themselves accordingly.”

How retirement savers can respond

The image shows a couple looking at their retirement investments.  T. Rowe Price says investors should expect returns next period that will be lower than in recent years.

The image shows a couple looking at their retirement investments. T. Rowe Price says investors should expect returns next period that will be lower than in recent years.

Investors saving for retirement have three options to meet the challenge of lower than expected future returns:

Save more or delay retirement: T. Rowe Price acknowledges that this may be the “less attractive” option, but saving more or simply delaying retirement can help offset lower returns. By delaying retirement, a person can reduce the number of years for which they will need retirement income. Delaying retirement and working longer can also allow a person to claim Social Security later. Delaying Social Security beyond full retirement age will result in a larger benefit.

Get more assets looking for growth: The second option may mean increasing the equity composition of a portfolio or entering fixed income securities that offer higher returns. That can lead to more risk, but a target-date fund with a growth-oriented path can be a good choice to do that, especially for investors whose retirements are still years away, T. Rowe Price said.

Limit spending in retirement: The third and final option is to limit spending in retirement. “T. Rowe Price analysis of retirees’ spending habits reveals that retirees tend to match their spending to their income,” the report says. “Most retirees who adjust their spending have the means and flexibility to do so. Poorer households, however, cannot afford to spend less.”


As the U.S. and other nations continue to reel from high inflation and a slowing economy, T. Rowe Price warns that investors should expect lower returns. To limit the impact of lower investment returns, those planning to retire can simply save more or delay retirement. They may also add more growth-seeking assets to their portfolios or adjust their spending habits in retirement.

Retirement Planning Tips

  • Do you know how much you’ll need saved for retirement? SmartAsset’s Retirement Calculator can help you figure out how big of a nest egg you’ll need to fund your retirement lifestyle.

  • A financial advisor can help you invest your retirement savings and create a tax-efficient plan for withdrawing the money. Finding a qualified financial advisor doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisors at no cost to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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