All return figures reflect NYU Stern (Damodaran) and Robert Shiller/Yale data through year-end 2025; fund expense ratios are as of mid-2026. This is educational information, not investment advice — past performance does not guarantee future results.
TL;DR — Quick Verdict
- From 1928 to 2025 the S&P 500 returned about 10.0% annually (nominal) and 6.9% after inflation, dividends reinvested — but no single decade actually delivered “average.”
- The 1950s were the best decade on record at 19.5% nominal (16.7% real); the 2000s “lost decade” was the worst at −0.9% nominal (−3.4% real).
- The 1970s exposed the trap of nominal thinking: 5.9% nominal but −1.4% real per year — a decade of positive numbers that still lost purchasing power.
- Comparison result: a low-cost tracker like Vanguard’s VOO (0.03%) or Fidelity’s FXAIX (0.015%) captures nearly all of these returns; a 1% advisor fee would have erased roughly a tenth of your compounding.
- Recommendation: model your own plan using the ~7% real figure most planners use, not the headline 10% — and treat sequence, not the average, as your real risk.
One number dominates every retirement calculator and cocktail-party investing tip: 10%. That is roughly what the S&P 500 has returned annually since 1928, according to the NYU Stern dataset maintained by finance professor Aswath Damodaran. Yet in 97 years of data, the index landed between 8% and 12% in only a handful of them. The “average” is a statistical artifact almost no investor ever actually experiences in a given year — or even a given decade.
Decades are where the real story lives. The 1950s compounded at 19.5% a year while the 2000s lost money outright. An investor who started in 1990 rode an 18.2% decade; one who started in 2000 endured a decade of negative real returns before recovering. Same index, wildly different outcomes, determined largely by an accident of birth year. This article breaks down S&P 500 returns decade by decade in both nominal and inflation-adjusted terms, shows why the gap between the two matters more than most people realize, and demonstrates how fund costs — the 0.03% on a Vanguard VOO versus a 1% advisor fee — quietly reshape which slice of those returns you actually keep.
S&P 500 Returns by Decade: The Full Data Set
Here is the decade-by-decade record, drawn from the Damodaran/NYU Stern annual return series and deflated using the Bureau of Labor Statistics’ CPI-U. Every figure below is a total return — price appreciation plus reinvested dividends — expressed as the annualized (geometric mean) rate for that ten-year window. The spread is the point: the difference between the best and worst decade is more than 20 percentage points a year.
Source: NYU Stern School of Business (Aswath Damodaran) annual return dataset and Robert Shiller/Yale data, deflated with BLS CPI-U; through year-end 2025 (verify at pages.stern.nyu.edu).
Notice how often the real column tells a different story than the nominal one. The 1940s look respectable at 9.0% until inflation cuts them to 3.0%. The 1970s look survivable at 5.9% until you see the −1.4% real result. If you are weighing how much of your portfolio belongs in equities versus other assets, this volatility is exactly why asset allocation by age exists as a discipline.
Nominal vs Real: Why the 1970s Should Terrify Long-Term Planners
Take a single scenario. Suppose you retired on January 1, 1970, with $500,000 and left it fully invested in the S&P 500 for the decade. On paper, your money grew at 5.9% a year — after ten years, a nominal balance near $888,000. You would feel richer by nearly $388,000. In purchasing power, though, you were poorer: at −1.4% real per year, the $500,000 you started with could buy roughly $435,000 worth of 1970 goods by 1980. The number on your statement went up while your actual wealth went down.
This is the single most expensive misconception in retirement planning. Nominal returns flatter you; real returns pay your grocery bill. The gap is driven entirely by inflation, measured through the BLS’s CPI-U index, which has averaged roughly 3% annually since 1928. Across the full 1928–2025 period that 3% is why the 10.0% nominal average shrinks to 6.9% real. Over a 30-year retirement, using 10% instead of 7% doesn’t just overstate your ending balance slightly — it can double your assumed purchasing power and leave you dangerously overconfident about spending.
The practical fix is to plan in real dollars from the start. Most fee-only planners model long-horizon equity growth at 7% real precisely to build in a margin of safety, and pair that assumption with a sensible fixed income allocation and return trade-offs to soften sequence risk. Retirees who ignore the real column tend to withdraw too aggressively early, when a bad decade like the 2000s can do permanent damage.
What Determines Which Decade You Get
Three forces explain almost all of the decade-to-decade variation, and none of them is stock-picking skill. The first is starting valuation. Decades that began cheap — the early 1950s, the early 1980s — delivered the strongest returns because investors paid little for each dollar of earnings. Decades that began expensive, like the 2000s after the 1999 tech peak, delivered the worst. Goldman Sachs analysts leaned on exactly this logic in an October 2024 note projecting just 3% nominal annualized S&P 500 returns over the following ten years, with a range of −1% to 7%, citing elevated starting valuations.
Inflation is the second force, and it works through the real column shown above. The 1940s, 1970s, and early 1980s all carried heavy inflation that quietly transferred wealth from stockholders to the erosion of the dollar. The third force is the sequence in which returns arrive — a factor that barely matters to a 25-year-old still contributing but can be decisive for a 68-year-old drawing down. A retiree who hits a 2000s-style decade in their first ten years faces a very different outcome than one who hits a 1990s-style decade, even if the long-run average is identical.
What you cannot control — valuation regimes, inflation, sequence — dwarfs what you can. But the controllable levers still compound. Keeping costs low, avoiding behavioral finance mistakes and their annual cost, and resisting the urge to abandon equities during a weak decade are the decisions that separate investors who capture the index return from those who don’t. History rewards the ones who stayed seated through the 2000s to collect the 2010s.
Index Fund vs Advisor Fee: Which Costs You More Over a Decade?
Suppose the next ten years deliver the long-run average of 10% nominal. Two investors each start with $250,000. The first holds a bare-bones S&P 500 tracker; the second pays a 1%-of-assets advisor on top of a similar fund. The index itself is identical for both — the only variable is the fee drag. That single percentage point, applied every year to a growing balance, is the difference between capturing the decade’s return and renting a slice of it back to someone else.
*Modeled at 10% nominal annual growth, dividends reinvested, fees deducted annually; ending balances rounded. Expense ratios from fund providers as of mid-2026 (verify at investor.vanguard.com and fidelity.com).
The three index products cluster within a few thousand dollars of one another — the fee difference between FXAIX and SPY is real but minor over a single decade. The advisor line is the one that stings: roughly $58,000 more than the cheapest fund, or about a tenth of the ending balance, gone to a recurring percentage. That is not an argument against all advice — a good fiduciary can prevent far costlier behavioral errors — but it reframes what you are buying. If you want the mechanics of how these fees compound, our breakdown of the long-term cost of investment fees runs the full curve, and the expense ratio comparison across fund providers shows how the cheapest trackers stack up.
Verdict
For a do-it-yourself investor who will stay the course, FXAIX or VOO wins decisively — the fee gap between them is trivial, and both keep essentially all of the decade’s index return. Choose FXAIX for dollar-amount auto-investing inside a Fidelity account; choose VOO for portability and taxable-account tax efficiency. Pay the 1% advisor fee only if you genuinely need behavioral coaching or complex planning worth more than the ~$58,000 it costs over ten years — otherwise it is the single biggest controllable drag on your returns.
What Most People Get Wrong About Decade Returns
Three mistakes recur so often they are almost universal. Each one has a specific consequence and a specific fix.
Mistake one: treating 10% as a reliable annual expectation. The consequence is a plan built on a number that has almost never occurred in a single year and swings from −0.9% to +19.5% across decades. The correct action is to model with the 7% real figure and stress-test against a lost-decade scenario, so a weak stretch doesn’t blow up your withdrawal plan.
Mistake two: confusing nominal with real. Someone who sees “5.9% in the 1970s” and assumes they’d have kept pace with inflation would have quietly lost 1.4% of purchasing power every year. The fix is to run every long-term projection in inflation-adjusted dollars and treat the nominal figure as a vanity metric.
Mistake three: abandoning equities after a bad decade. Investors who sold out during the 2000s locked in the loss and missed the 13.6% recovery of the 2010s — the exact pattern that makes market timing so destructive, as the record of recession investing and market timing history shows. The correct action is a written plan and, if needed, automatic rebalancing without triggering taxes so decisions are mechanical rather than emotional. A fourth, quieter error: assuming U.S. large-caps are the whole story, when international diversification costs and benefits can change which decade you actually experience.
Is the S&P 500 Alone Worth It for Your Situation?
Whether the index by itself is enough depends less on the historical return than on your timeline and temperament. For a 30-year-old with a 35-year horizon, the decade you start in barely matters — you will collect several decades and converge toward the long-run 6.9% real average. Over rolling 30-year windows, real returns have stayed within a relatively tight 4% to 9% band, which is why the young accumulator can afford to ignore short-term drama and simply keep buying.
The calculus flips for anyone within a decade of drawing down. A pre-retiree who happens to start withdrawing at the front of a 2000s-style decade faces sequence-of-returns risk that no long-run average can rescue. For that investor, the S&P 500 alone is rarely worth it; a diversified mix that dampens the bad-decade downside is the more defensible choice, and vehicles like target-date fund costs and convenience value exist precisely to automate that glide path. Comparing the index against other core assets — the long-run case in real estate vs stock market long-term returns — also helps clarify how much single-asset risk you are actually carrying.
The honest answer for most people sits in the middle. A low-cost S&P 500 tracker is an excellent core holding, and for a young investor it can reasonably be most of the portfolio. But the decade data is a standing reminder that “the market returns 10%” is a long-run statement that says nothing about the ten years you happen to live through — and the ten years around your retirement date are the ones that decide your outcome.
Frequently Asked Questions
What is the average annual return of the S&P 500?
From 1928 to 2025, the S&P 500 returned approximately 10.0% per year nominal and 6.9% per year real (after inflation), with dividends reinvested, according to the NYU Stern dataset maintained by Aswath Damodaran. The decade-level variation is enormous — the 1950s returned 19.5% nominal while the 2000s lost 0.9% — so the long-run average rarely matches any single year or decade.
What was the S&P 500’s worst decade?
The 2000s, known as the “lost decade.” The dot-com crash of 2000–2002 and the 2008 financial crisis combined to produce a −0.9% nominal annualized return for the entire ten years, and −3.4% per year after inflation, per the NYU Stern/Damodaran data. An investor who bought in early 2000 and sold in late 2009 lost purchasing power despite a full decade in the market.
Should I use 10% as my long-term return assumption?
Ten percent nominal is the historical average since 1928 and is reasonable only for very long horizons of 40 or more years. For 20-to-30-year planning, most fee-only advisors use about 7% real to build in a safety margin. Some researchers, including Vanguard and Goldman Sachs in an October 2024 note, currently project just 3% to 7% nominal over the next decade because of elevated starting valuations.
Why is the real return so much lower than the nominal return?
Real return equals nominal return minus inflation, measured through the BLS CPI-U index, which has averaged roughly 3% annually since 1928. That is why the S&P 500’s 10.0% nominal average shrinks to 6.9% real. In high-inflation decades like the 1970s the gap was brutal: 5.9% nominal became −1.4% real, meaning investors lost purchasing power even as their account balances rose.
How We Researched This Article
The decade-by-decade return figures in this article come from a single authoritative chain of primary sources. Annual total returns for the S&P 500 are drawn from the historical U.S. equity return dataset compiled by Professor Aswath Damodaran at the NYU Stern School of Business, which extends back to 1928 and is refreshed each January — the version used here was updated through year-end 2025. These nominal returns include both price appreciation and reinvested dividends. Real (inflation-adjusted) returns were derived by deflating the nominal series with the Consumer Price Index for All Urban Consumers (CPI-U) published by the U.S. Bureau of Labor Statistics, cross-referenced against Robert Shiller’s long-run S&P 500 dataset at Yale. Decade-level figures represent the geometric mean (annualized rate) of the annual returns within each ten-year window, not a simple average, so they accurately reflect compounding.
Fund expense ratios were taken directly from provider disclosures as of mid-2026: Vanguard’s VOO at 0.03%, Fidelity’s FXAIX at 0.015%, and State Street’s SPY at 0.0945%. The fee-drag and retirement scenarios are modeled illustrations, not measured historical outcomes — they assume a constant 10% nominal growth rate for clarity and will differ from any real sequence of returns, which is noisier. Forward-looking return estimates are attributed to their originators (Goldman Sachs, Vanguard) and are projections, not data. Primary references include Damodaran’s NYU Stern dataset, the BLS Consumer Price Index, and Federal Reserve economic data. A key limitation: past decade returns describe history and carry no guarantee about the decade you will actually invest through. This analysis was last conducted in July 2026. All figures were verified against named primary sources before publication.