Many people assume they can ride the stock market’s long-term growth indefinitely. And for much of your working life, that’s a reasonable strategy. You contribute, you invest, and you stay the course. “Buy and hope” seems to work. But as you approach retirement, the need shifts—from growth to generating reliable income. That means rethinking your investment strategy, and more importantly, understanding how market returns actually work.
For those looking to generate the highest growth possible, without doubt stocks have proven historically to be among the highest returning investments available. And for younger investors, or those with at least ten years or more to retirement, it is arguably the wisest asset allocation strategy.
We often hear that the stock market “averages” 10% a year. That figure gets repeated in articles, calculators, and glossy investment brochures. But it’s based on long-term averages that go back over 70-90 years. That doesn’t necessarily represent your cycle. For example, we’ve had numerous 10-15 year periods where the stock market has grossly underperformed. We’ve also had numerous periods where it has significantly outperformed. But, this concept of “10%” is not reality for most of us.
In fact, if we go back to the inception of the S&P (1928), according to Morningstar, the average return excluding dividends was 7%. But you can see the 10-years cycles have ranged dramatically in outcomes.
10-Year Rolling S&P Returns since 1928
This chart is for illustrative and educational purposes only and does not represent the performance of any specific investment or portfolio. Past performance is not indicative of future results. Investors cannot invest directly in an index. All investing involves risk, including the potential loss of principal. Data provided by Morningstar.
The reason this matters is because the economic environment we face during key phases of our lives—starting a career, buying a home, retiring—isn’t something we get to choose. It’s more a matter of dumb luck (or bad luck) than it is skill. Consider those who were just entering the workforce thirty years ago. They began their careers in the mid-1990s, when markets were booming, interest rates were falling, and globalization was opening up a world of economic possibility. Their retirement savings had the wind at their backs. But compare that to someone who started working in 2008 during the financial crisis, or someone entering the job market during the COVID-19 shutdowns. Same hard work. Same planning. Entirely different outcomes.
Economic cycles are beyond our control—but they play a central role in shaping our financial lives. We don't get to schedule bull markets around our retirement dates, nor can we postpone major decisions until after the next recession clears. Inflation, interest rates, housing markets, job stability, and stock valuations are constantly shifting. These forces don’t care if you are behind on your savings and really cutting back to invest for your retirement or if you're finally ready to leave a high-stress job. So much of financial success depends not just on what you do, but when you do it. However, you can't predict the economy.
Let’s Look at Real Life
We always say, “It’s time in the market, not timing the market that matters”—and there may be no better illustration than the long arc of a 401(k), from the first contribution in early adulthood to withdrawals in retirement. Markets don’t move in straight lines, of course, but over three decades, time can help smooth out the volatility.
Imagine you started contributing to a 401(k) thirty years ago. That would place your entry point at the dawn of the dot-com boom, when the market seemed unstoppable. From 1995 through 1999, the S&P 500 averaged over 26% annually. If you think today’s market has been strong, it’s modest by comparison.
Every $100,000 invested during that five-year window would have grown to $320,000—tripling in value in just five short years. By contrast, the past five years (from January 1, 2020 to December 31, 2024) have averaged 8.8% annually. Still solid—but $100,000 would have grown to only $182,000. The point isn’t that one era is better than another, but that your results can look dramatically different depending on when you happened to begin—something that is more or less out of your control.
Going back to 1995, if you were just starting your career (say you were in your early 30s) and started contributing to a 401(k) from scratch, it’s important to remember that most of your money didn’t enter the market during those big early gains. Your contributions were spread out—coming in paycheck by paycheck—and so they trickled into the market gradually, not in one lump sum. Even though the S&P soared during those years, your dollars were arriving in stages, which meant only a portion of your money experienced the full benefit of that rally. This is the reality of long-term saving: it’s not just about what the market does, but when your dollars are exposed to it.
Let’s take a look at this decade-by-decade. Because the truth is, in the early years, no matter how strong the market is, your 401(k) balance often feels like it’s barely moving. You contribute faithfully, year after year, but the growth seems slow. Even after a full decade of saving and investing, it can still feel like there’s just not enough. It’s not that the strategy isn’t working—it’s that compounding takes time to reveal its full power. The first ten years are the hardest because you're doing the work but not yet seeing the payoff. That’s why staying invested and staying committed matters more than trying to outguess short-term market moves. The real acceleration happens later, when time and consistency finally intersect.
And it doesn’t seem to matter whether you start investing during a booming market or in the middle of a crisis. Over the course of decades, the timing of your first few contributions plays a far smaller role than your ability to stay the course. The real power lies in consistency—showing up with every paycheck, through market highs and lows, and letting time do the heavy lifting.
But stay with me for Part II next week, because that’s when the rules change. Everything shifts when you retire, or even get close to retirement. Because you’re no longer a systematic buyer but become a systematic seller. That’s when sequence of returns, income planning, and capital preservation take center stage—and the risks you face in those early retirement years look very different than anything you’ve encountered before.
It’s always what you can’t see that can make all the difference. And that is especailly illuminated in the early years of saving. What you don’t see is the curve beginning to steepen. Growth often feels slow at first, but time and discipline don’t just reward you—they multiply. Quietly, behind the scenes, compounding is gaining momentum. And then, seemingly all at once, your portfolio starts to accelerate. That’s the magic of long-term investing in the stock market, although results obviously are not guaranteed.
Look at the chart below. In this example, the employee contributed the maximum allowable amount to his 401(k) each year, based on the actual IRS contribution limits in effect at the time. Every dollar was invested in the S&P 500 (although you can't invest directly in the index so fees and expenses have not been taken into consideration). This reflects real market performance and real-world contribution limits over time.
1995-2004 Results: Just Starting Out
This chart is for illustrative and educational purposes only and does not represent the performance of any specific investment or portfolio. Past performance is not indicative of future results. Investors cannot invest directly in an index. All investing involves risk, including the potential loss of principal. Data provided by Morningstar.
Let’s discuss a few key points here. First of all, let’s face it - after saving diligently (and we all know contributing the max in a 401k is a stretch for most people), this employee diligently saved $104,500 out of his or her own pocket and after ten years of hard work has $144,308 in their account - only $40,000 in gains. It could certainly feel as if this strategy isn’t going to get them successfully to retirement.
Second, notice the stellar five years from 1995-1999 compared to what followed. The first five years averaged 26%, but the next averaged -3.78%. So, naturally, it was reasonable to question the strategy, especially when the gains were nearly wiped out in 2002.
Third, despite the major market bust in the early 2000s, the 10-year average annual return for the S&P 500 from 1/1/1995 to 12/31/2004 was still a solid 9.5%. But that strength can be easy to overlook, depending on the point of view. The story changes depending on where you start the clock and whether or not you stop it. If this employee sold out of stocks after 2002, he or she would have missed the significant rebound. That's the way the markets work - sharp declines, sharp rebounds. It’s a reminder that narratives can shift dramatically based on selected timeframes, even when the underlying data is sound.
Finally, and most importantly, this employee’s Internal Rate of Return (IRR) over the full period was 6.82%—despite being invested 100% in the S&P 500. That’s a far cry from the 9.5% average annual return the S&P itself delivered from 1995 to 2004. And no, this calculation does not include fees, which would only lower the actual account value and reduce the return further. So why was the employee’s return so different?
Because unlike a one-time investment that rides the market from beginning to end, when we save for retirement through our 401k, we contribute money gradually—paycheck by paycheck—over time. That means when we accumulate wealth systematically, most of our dollars don’t experience the full ride. In this case, it really matters because of those early high-return years. The IRR reflects the actual return on the money as it was invested, not just the return of the market in isolation. In other words, while the S&P’s performance over that period looks impressive on paper, the employee’s real experience was shaped by when their contributions entered the market.
It’s a perfect example of why the returns you see in an index chart don’t always translate directly into the returns you earn in real life. IRR tells the investor’s truth—accounting for timing, cash flow, and compounding in a way that a market average never can.
Now, if that is the impact on savings, imagine the impact on withdrawals! Stay tuned for next week’s blog on that. Before we close this side of the story, however, let’s run out the full 30 years because the picture begins to look substantially different with time.
The next ten years, from 2005 to 2014, were a bit more challenging for the economy, marked by the housing crash and the global financial crisis. It would have been easy to change course out of panic—as many did. I met far too many workers during that period who stopped contributing altogether because they thought, “Why put my hard-earned money in an investment that’s losing value?” While intellectually that argument might make sense in the moment, it misses the bigger picture. Those downturns didn’t last forever. In fact, the recovery that followed rewarded those who stayed consistent, kept contributing, and ignored the noise. Time and again, markets have shown the same pattern: periods of sharp decline followed by powerful rebounds.
But to benefit from the rebound, you have to stay with your strategy. Those who paused or pulled out often missed the early stages of recovery—the part where compounding resumes and real wealth starts to build again.
That said, remember we are talking about wealth accumulators right now. There is a big difference as you transition into retirement and that same discipline can hurt you, so the approach must change. But it’s in this next decade where the magic starts to happen for most 401k participants who stay the course- not because of the economic cycle but because of time and the magic of compounding.
2005-2014 Results: Building Traction
This chart is for illustrative and educational purposes only and does not represent the performance of any specific investment or portfolio. Past performance is not indicative of future results. Investors cannot invest directly in an index. All investing involves risk, including the potential loss of principal. Data provided by Morningstar.
First of all, the S&P 500 averaged 7.63% annually from 2005 to 2014. Over this period, remember this worker wasn’t starting from scratch – they had accumulated $144,308 as we rolled into this period. They just continued contributing the maximum allowed amount each year without interruption - even through the 2008 financial crisis.
The result? Their Internal Rate of Return (IRR) over this ten-year stretch was 8.9%. That’s right—this time, their personal return outpaced the market average. Why? Because IRR reflects the timing of real cash flows. And when you invest through a market downturn, your dollars buy more shares at lower prices.
Assuming you eventually experience a rebound, those shares participate fully. This is the benefit of disciplined investing—especially during volatile markets. When you are saving for retirement, the market doesn’t need to be perfect for your strategy to succeed. You just have to keep going.
Let’s see what happens in the final decade of this person’s career by looking at the third leg of 401k savings and market performance from 2015 to 2024. Now, as he or she graduates to more than twenty years of disciplined saving, the rewards of compounding—what Mark Twain famously called “the eighth wonder of the world”—really begin to shine. Yes, contribution limits have also increased with inflation, giving investors the ability to put more away and while that is important, that’s not what makes the real difference. It’s time. Time in the market. Time for growth to build upon itself. Time for gains to generate gains.
As this employee approaches his or her third decade of savings, probably in their early 50s, they start feeling pretty good about their retirement prospects. And they should. Time and discipline has worked well for them. They didn’t let the headlines of the moment derail their focus. They didn’t let the market volatility, politics, CNN or CNBC or social media disrupt their plan.
Look at what happens this last ten year stretch. After thirty years contributing the maximum allowed to a 401(k) and staying true to a growth-focused strategy, this employee now has $2.4 million for retirement. That’s the result of steady, disciplined investing over time—not market timing or lucky guesses.
They began this period with close to $600,000 in their 401k and over this 10-year time frame, faced no shortage of reasons to waver. The COVID-19 pandemic, aggressive interest rate hikes by the Federal Reserve, three presidential elections, and countless bouts of market volatility—all could have easily shaken this investor’s confidence. But they didn’t flinch. They continued to invest, trusting the process and their long-term plan. And that discipline paid off. Now, after three decades of staying the course, they’ve built a substantial nest egg—enough to approach retirement not with fear, but with a strong foundation and a sense of confidence.
2015-2024: The Final Leg
This chart is for illustrative and educational purposes only and does not represent the performance of any specific investment or portfolio. Past performance is not indicative of future results. Investors cannot invest directly in an index. All investing involves risk, including the potential loss of principal. Data provided by Morningstar.
Let’s sum this up.
Over the course of thirty years, this employee contributed a total of $462,500 of their own capital into their 401(k). Today, that account is worth just over $2.4 million—meaning $1.9 milion represents pure earnings. That’s the power of disciplined, long-term investing. Slow and steady contributions, made consistently over time, can compound into real, life-changing wealth. It didn’t require perfect timing, stock picking, or market forecasts. It required patience, faith in the US economy, and a commitment to keep going—even when headlines screamed otherwise. Thirty years of diligent saving, fueled by a growth mindset and a refusal to get derailed, turned modest contributions into financial independence.
The average annual return of the S&P 500 over this 30-year period was 10.83%, slightly above its long-term historical average. This employee’s personal return, measured by Internal Rate of Return (IRR) and accounting for the time value of his or her monthly contributions over time, came in at 10.16%—a remarkably strong result given the ups and downs of the market along the way.
What this illustrates is that the market doesn’t discriminate. Whether you contributed $462,500 or half that amount, your return would have been roughly the same. The difference would be in how much you accumulated—not how effectively your money worked. In other words, it’s not just what you earn in the market, it’s what you put into it. Discipline and consistency are what drive long-term outcomes, not perfectly timed entries or flashy strategies.
This is a success story—no question. Thirty years of disciplined investing, consistent contributions, and staying the course through these past turbulant periods, through some of the most extreme volatility we've seen on record, has paid off. But as impressive as this growth is, it’s not the end of the journey. In fact, it’s where a new chapter begins—one that requires a different mindset. Because the truth is, the same strategy that built this wealth may not be the best one to protect it.
If you plan to retire this year or within the next five years, now is the time to start rethinking your approach. Why? Because the stakes are different. You are no longer trying to grow a balance from zero—you are preparing to draw income from a sizable portfolio. When you retire, the story changes. Market losses in those early retirement years can have a far greater impact than they did during the accumulation phase.
In Part II, next week, I’ll walk through why the strategy needs to shift to preserve what’s been built and ensure it lasts—because protecting wealth requires a different playbook than building it. You will see based on actual results, how once you stop contributing and start withdrawing, the rules change—and the risks do too.
If you're nearing retirement and wondering how to pivot your strategy, stay tuned for Part II—or schedule a conversation with us to explore how your current approach aligns with your retirement goals.
These figures reflect historical performance and is not a guarantee of future results.
IRR reflects the internal rate of return based on actual contributions and withdrawals. It is not directly comparable to index returns, which assume a lump sum investment with no cash flows.