I'm not sure how good Vanguard's track record has been, but the Inflation and TIPS both seem low... and those are things we have pretty good market-based models for. Especially TIPS.
I've tracked Vanguard's predictions for years, as a data point, and they've grossly underestimated equities all through that time. But hard to blame them since everyone else did the same thing. And if we had a long "lost decade" the final average might come out to where they've predicted. Their model is a giant bootstrap, but using variables behind the numbers like interest rates and inflation to gdp to model the various returns; but it's all hidden and proprietary, so it's hard to know what to do with their predictions not knowing exactly how they derive things.
With TIPs I'm guessing they are estimating that over the next ten years interest rates will fall.
In addition to the deterministic "best guess", I do think stress testing with alternate scenarios would be quite useful. In particular, making return negative over the first 3 years and then higher recovery rates for years 4-10 such that the 10 year annualized return equals the best estimate 10 year assumptions. Maybe assume all asset classes have returns of best est - X standard deviations for the first 3 years and then back into the required returns for years 4-10. Then I just need to decide on a value for X.
I like that Vanguard's model encourages us to think in a probability range rather than relying on the median. (They give the 5th/25th/50th/75th/95th percentile predictions.)
So in terms of stress testing, e.g. their 10y bands for US Equities (nominal) are: -2% (5th), 3.4% (25th), 5.6% (median), 7.9% (75th), 11.6% (95th).
10y aggregate bond bands are : 3.5% (5th), 4.2%, 4.6% (median), 5.1%, 5.8%, 6.5% (95th).
If you work in the fact that inflation itself as a range 25-75th percentiles of 1.6% - 2.4% (and as high as 3.1% in the 95th percentile), this creates some nice stress tests.
In case you're interested, my current inventory of the most recent analyst forecasts is attached below along a summary of their most recent forecasts for US Large-cap equities.
Personally I favor the iERP method (A. Damodaran), but I think equity analysts are an interesting data point for comparison and are a good source for:
1) Ideas for new asset classes to investigate (e.g., Intl'l Markets, Small-Mid Caps, REITs, Emerging Markets, Private Markets, etc)
2) Correlations
3) Volatility/Std Devs
.
Forecast: US Large Cap Equities - CAGR% - Outlook - (Data/Publication Date)
(All Forecasts Nominal, USD)
- Vanguard - 4.9% - 10yrs (1/22/2026)
- Schwab - 5.9% - 10yr (1/2/2025)
- JP Morgan - 6.7% - 10-15yr (12/31/2025)
- Northern Trust - 6.8% - 10yr (12/1/2025)
- Goldman Sachs - 6.5% - 10yr (11/12/2025)
- Blackrock - 4.4% - 5yr (11/1/2025)
- Fidelity - 5.8% - 20yr (8/25/2025)
- Morgan Stanley - 6.5% - 7yr (3/27/2025)
Consensus Average = 5.9% (Nominal CAGR%, ~10 yrs)
Forecast: US Large Cap Equities - CAGR% - Outlook - (Data/Publication Date)
(All Forecasts Nominal, USD)
- Vanguard - 4.9% - 10yrs (1/22/2026)
- Schwab - 5.9% - 10yr (1/2/2025)
- JP Morgan - 6.7% - 10-15yr (12/31/2025)
- Northern Trust - 6.8% - 10yr (12/1/2025)
- Goldman Sachs - 6.5% - 10yr (11/12/2025)
- Blackrock - 4.4% - 5yr (11/1/2025)
- Fidelity - 5.8% - 20yr (8/25/2025)
- Morgan Stanley - 6.5% - 7yr (3/27/2025)
Consensus Average = 5.9% (Nominal CAGR%, ~10 yrs)
Thanks! Good stuff.I was unable to find an explicit inflation assumption for Northern Trust, Blackrock and Morgan Stanley, so I can't compute a real rate of return (RROR) and will exclude them. I wish Blackrock provided inflation assumptions because I really like the rest of the information they provide. The Schwab assumptions are a year old, so I'm going to exclude them as well.I'm left with the results below.
Company Published Timeframe (Yrs) US Equity Inflation RROR 1 Vanguard 1/22/2026 10 4.9% 2.0% 2.8% 1b Vanguard 1/22/2026 30 5.6% 2.0% 3.5% 3 JP Morgan 12/31/2025 15 6.7% 2.5% 4.1% 5 Goldman Sachs 11/12/2025 10 6.5% 2.2% 4.2% 7 Fidelity 8/25/2025 20 5.8% 2.6% 3.1%
Forecast: US Large Cap Equities - CAGR% - Outlook - (Data/Publication Date)
(All Forecasts Nominal, USD)Vanguard - 4.9% - 10yrs (1/22/2026) Schwab - 5.9% - 10yr (1/2/2025) JP Morgan - 6.7% - 10-15yr (12/31/2025) Northern Trust - 6.8% - 10yr (12/1/2025) Goldman Sachs - 6.5% - 10yr (11/12/2025) Blackrock - 4.4% - 5yr (11/1/2025) Fidelity - 5.8% - 20yr (8/25/2025) Morgan Stanley - 6.5% - 7yr (3/27/2025)
Consensus Average = 5.9% (Nominal CAGR%, ~10 yrs)
I was unable to find an explicit inflation assumption for Northern Trust, Blackrock and Morgan Stanley, ... The Schwab assumptions are a year old, so I'm going to exclude them as well. I'm left with the results below.
Company Published Timeframe (Yrs) US Equity Inflation RROR 1 Vanguard 1/22/2026 10 4.9% 2.0% 2.8% 1b Vanguard 1/22/2026 30 5.6% 2.0% 3.5% 3 JP Morgan 12/31/2025 15 6.7% 2.5% 4.1% 5 Goldman Sachs 11/12/2025 10 6.5% 2.2% 4.2% 7 Fidelity 8/25/2025 20 5.8% 2.6% 3.1%
I find the median more useful than the average for these sort of compilations, to minimize outliers.
From Kevin's list the median expected return is: 6.2% nominal. With a 2.4% inflation, that comes to 3.7% real.
The median of CZ's edited list is 3.5% real.
It is also worth noting that international stocks have a much higher predicted return by these firms, by at least 1+%.
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PS.
- Morningstar has a good compilation of the same data: https://www.morningstar.com/markets/experts-forecast-stock-bond-returns-2026-edition
- And the most robust compilation of all of large firm forecasts (by far!) is from Horizon Actuarial, latest report from last august, the file attached to this message. (27 select firms, 41 firms in their larger survey).
Nice summary of the Horizon actuarial 41 firm survey, pdf attached to last post.
Nice summary of the Horizon actuarial 41 firm survey, pdf attached to last post.
Wow! Thank you so much for this excellent resource!
- And the most robust compilation of all of large firm forecasts (by far!) is from Horizon Actuarial, latest report from last august, the file attached to this message. (27 select firms, 41 firms in their larger survey).
This Horizon Actuarial report is a fantastic summary. Thanks for posting the pdf. I would give you more than 1 thumbs up if I could.
Exhibit 17 is quite nice and I would post a screen shot if I could figure out how.
- Morningstar has a good compilation of the same data: https://www.morningstar.com/markets/experts-forecast-stock-bond-returns-2026-edition
- And the most robust compilation of all of large firm forecasts (by far!) is from Horizon Actuarial, latest report from last august, the file attached to this message. (27 select firms, 41 firms in their larger survey).
Thanks @jkandell, these are really interesting resources!
Another valuable resource for predicting returns is tpaw's regression analysis of the sp500. https://tpawplanner.com/plan/expected-returns-and-volatility
Ben Mathews has regression averages for monthly data 1871-present (data from Shiller's site) of the log cape10 vs subsequent 10y log sp500 returns. Unlike most sites offering expectations, his figures are for real arithmetic average returns. (So you'd need to adjust down to a CAGR for Pralana.) These are purely valuation based estimates, so returns tend to be quite small lately.
Mathews runs the regression for 5, 10, 20, 30y return averages daily, and in each of those spans for "all data" and "data since 1950". With this info of 8 data points you can establish expected returns for short term (averaging his four 5y and 10y figures) and long term (the 20 and 30 year figures). For instance, currently, the 7y estimate would be roughly 4.4% real (6.8% nominal/ 3.3% cagr real), and the 25y estimate would be roughly 5.8% (8.4% nominal, 4.2% cagr real). There is a lot of variation around the regression, so consider these the center of a wide cloud of returns.
Because we are looking at FIRE and not just retire, I tend slightly conservative:
General Inflation: 3.0%
Healthcare: +2.0%
Medicare: +2.0%
Real Rates of Return:
Cash: -1.0% (we don't hold a lot, so not a big diff.)
Stocks: 4.5%
Bonds: 1.5%
Seems better for planning a potential 40+ year retirement.
Just wondering where the Medicare +2% inflation add-on came from. It's my understanding that Medicare increase is based mostly on CPI (general inflation), so this maybe double counting:
Medicare Inflation Calculation
Medicare inflation is primarily measured through the Consumer Price Index (CPI), which tracks changes in prices for medical care services and commodities. This index helps determine how much Medicare pays for various services and drugs.
Key Components of Medicare Inflation
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Medical Care Services: This includes professional services, hospital services, and health insurance.
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Medical Care Commodities: This category covers medicinal drugs, medical equipment, and other health-related products.
Calculation Methodology
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Data Collection: The Bureau of Labor Statistics (BLS) collects data on retail prices for medical services and goods.
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Weighting: Each item in the CPI is assigned a weight based on consumer spending patterns. Items that consumers spend more on have a higher weight in the index.
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Price Changes: The CPI measures the average price change over time for a fixed basket of goods and services, allowing for the calculation of inflation rates.
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Adjustment for Inflation: Medicare uses these inflation rates to adjust payments for services and drugs, ensuring that reimbursements reflect current costs.
Impact on Medicare
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Rebate Programs: Under the Inflation Reduction Act, Medicare can bill drug manufacturers for rebates if prices increase faster than inflation, helping to control costs.
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Annual Updates: Medicare adjusts its payment rates annually based on the CPI, ensuring that they keep pace with inflation in medical care costs.
This systematic approach helps maintain the affordability and accessibility of healthcare services for Medicare beneficiaries.
https://www.bls.gov/cpi/factsheets/medical-care.htm
@pizzaman
Generally I think medical costs will rise faster than inflation, and those are a big part of our FIRE expenses, so it feels right to be conservative in that.
A quick google of "do medicare costs track CPI?" and AI summary says...
Medicare costs, particularly premiums for Parts B and D, often rise faster than the general Consumer Price Index (CPI) and Social Security cost-of-living adjustments (COLAs). While CPI includes Medicare premiums and out-of-pocket costs, it does not fully track total program expenditure growth, which is driven by medical inflation.
Fair enough. But these costs may also be covered in your Healthcare: +2.0% which is an option to add in PRC. Does PRC offer the ability to also add the Medicare: +2.0% ??
Yes it is a separate entry - so healthcare is +2% above the 3% general inflation and so is Medicare.
