I have been fascinated or economicly curious about what the world is going to look like in the next 10 to 20 years; or, even 30 to 40 years. One thing that I intuitively believe, returns of the past 100 years are not a good proxy.
I read this Q&A from Chief Executive Officer and Chief Investment Officer of Vanguard, and a couple things stood out for how folks can/should prepare for a lower-return enviornment:
- In a lower-return enviornment, costs take a bigger percentage of the returns. Low-cost investments are key.
- Increase savings rates by 1 to 2% each year. This will help to account for the lower return enviornment.
- The average savings into a 401K with company match is 10%. They are recommending around 12 to 15%.
Read Vanguard’s Addressing Lower Returns here.