We recently interviewed flat-fee financial advisor Adam Grossman for Morningstar’s “The Long View” podcast and asked him about his biggest worry for current retirees. The answer? The possibility of another “lost decade,” when stocks fail to generate positive returns over an extended period. The last time that happened was during the 2000s, when the bear market in tech stocks early in the decade was followed by another series of sharp losses during the global financial crisis.

An event like that is particularly painful for retirees because they’re usually drawing down assets from their portfolios to help support retirement spending. A prolonged series of market losses not only has an immediate negative impact but can also endanger the long-term viability of their nest eggs. That’s because portfolio withdrawals during a down market leave fewer remaining assets to benefit from an eventual rebound.

Let’s look at how often lost decades actually happen and some steps retirees can take to protect themselves from potential damage.

Lost Decades Are Rare But Painful

The first thing to know is that lost decades don’t happen very often. Since 1925, there have been only two major periods when rolling 10-year returns were below zero: during the Great Depression and during the 2000s (as mentioned above).

The Great Depression saw those negative rolling returns mainly during the timespan from December 1928 through September 1940. Someone who bought $10,000 in stocks at the beginning of that period would have been left with less than $8,200 by the end.

The 2000s were almost as damaging. Early in the decade, stocks posted cumulative losses of 34%. There was a brief reprieve from 2003 through 2007, followed by another 37% decline in 2008. An investor who purchased $10,000 in stocks at the beginning of 2000 would have been left with less than $9,900 by the end of 2009.

As bad as that sounds, though, it’s not that common. Over the full period from 1926 through May 2026, rolling 10-year returns for stocks were negative only about 4.6% of the time.

The charts above are based on nominal returns (not adjusted for inflation). The picture looks slightly different after adjusting for inflation. Take the period from June 1964 through July 1976. Nominal returns were positive but coincided with a period of high inflation, which averaged about 5.2% per year over the same interval. Because inflation was so high, investors still lost money in real terms even though returns for stocks seemed to be holding up relatively well.

What to Do If You’re Worried About a Lost Decade

Even though lost decades don’t happen often, retirees can take several steps to mitigate the risk of an extended market downturn.

Set a Realistic Withdrawal Rate.

I’ve heard people ask why they can’t just set an initial withdrawal rate of 7% or 8% to help cover their retirement spending, given that stocks have generated more than 10% in annual returns, on average, over the long term. The problem is that returns for any given period can be much lower, making those types of withdrawal rates less sustainable.

Make Sure You Have a Balanced Portfolio.

Holding a healthy stake in investment-grade bonds is one of the best ways to ease the risk of an extended downturn in stocks. While bonds aren’t a cure-all, they usually provide a reliable buffer during periods of equity market weakness. In our most recent State of Retirement Income report, we found that portfolios with a total of 50% to 70% in bonds and cash allowed for the highest starting safe withdrawal rates for investors seeking at least a 90% probability of not running out of assets over a 30-year period. Even investors who are comfortable with a lower probability of success should still have some exposure to bonds and cash.

Consider a Bucket Strategy, Which Is Another Way of Incorporating Safer Assets in a Retirement Portfolio.

The Bucket strategy typically allocates one to two years’ worth of spending to cash, an additional five to eight years’ worth in high-quality bonds, and the remainder in stocks. If stocks hit an extended downdraft, you can pull withdrawals from the cash or bond buckets, thereby avoiding the need to sell stocks while they’re declining.

A TIPS Ladder, Which Involves Buying a Series of Treasury Inflation-Protected Securities With Staggered Maturity Dates, Can Also Help Retirees Minimize the Risk of Equity Market Declines.

As each bond matures, retirees can use the proceeds to cover spending. One option is to set up a 30-year TIPS ladder to cover essential spending while keeping a portion of assets in stocks to help generate long-term growth. Another possibility is to set up a 10-year TIPS ladder to cover the first decade of retirement, when an extended downturn in stocks can do the most damage, which is known as sequence of returns risk.

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