Lost 22% of our IRA/401Ks/Investments

[Torvy]

I only invest in mutual funds, no single issue stocks. And I am in the riskier types. One fund Select Semiconductor has averaged a 25% yearly gain over the past ten years. But when the market drops, that fund DROPS. Then it comes back strong. Not the first time I have watched this happen.

That's a key piece of info!

Rarely does a broad fund lose money over the mid-long term. The economic conditions needed for that to happen would bring about the type of disarray that preppers prep for....in other words, the system would collapse anyway.

Buying individual stocks can be boom or bust. You have to be lucky or very good at analysis (sometimes both). Politics, weather and other unpredictable events can tank an individual stock. Usually when one stock (or industry) is down, there are counter-indicated investments that do well. That's why it is almost impossible to make less than 7% over time. You really have to have made poor decisions or trusted someone who made them for you.

 

[LittleBittyBigJohn]

I'm happy with mine so far.

 

[jyoutz]

But it was the end of the world…. The markets dropped like 50%…

Kids these days are afraid of 10%

It all depends on the time frame when you need the money. Long term no problem; retiring tomorrow: big problem when the market drops.

 

[Torvy]

It all depends on the time frame when you need the money. Long term no problem; retiring tomorrow: big problem when the market drops.

It's not like you take the money out when you retire. It keeps making money. You change the risk level of your investments as you age. Move more into income production rather than price changes.

If you are really concerned about this, get a good investment guy. They make a world of difference. Need to find one that's about 20 years younger than you, so they don't retire before you don't care anymore.

 

[jyoutz]

It's not like you take the money out when you retire. It keeps making money. You change the risk level of your investments as you age. Move more into income production rather than price changes.

If you are really concerned about this, get a good investment guy. They make a world of difference. Need to find one that's about 20 years younger than you, so they don't retire before you don't care anymore.

Actually I’m not at all concerned and I don’t need any of my investments for retirement living expenses. But many people do.

 

[CloverKnollFarms]

Made money today since Canada caved in and gave up on their digital tax.

 

[MossRoad]

We lost 22% of our investments in February, March and April. Three months later we are back in the black and making money again.

Basically my wife and I lost, on paper, two years salary each in about 45 days. This was from her 401K, my IRA, and our investments. The only thing that didn't lose value was an annuity paying 3% that my wife had inherited. Everything slowly started coming back in May, and now before June is over we were even last Thursday and made money again Friday. I didn't change a single investment, just let it all ride.

YOU DON'T ACTUALLY LOSE MONEY UNTIL YOU CASH IT IN.

When the news stations are all gloom and doom and the stock market is crashing, that means stocks and mutual funds are on sale. And you BUY!! When you sell is when everything is going up.

RSKY

Here's a fun site to put it in term of administrations. Under the graph, you can click whichever administration(s) you want and compare them side-by-side, over time, etc... the only ones to leave it in negative territory were Hoover, Nixon and W. Bush administrations.

S&P 500 Performance by President

This interactive chart shows the running percentage gain in the S&P 500 by Presidential term. Each series begins with the closing value of the month of inauguration and runs to the closing value of the last month of the term. The y-axis shows the total percentage increase or decrease in the...

www.macrotrends.net

 

[dstig1]

It all depends on the time frame when you need the money. Long term no problem; retiring tomorrow: big problem when the market drops.

It's not like you take the money out when you retire. It keeps making money. You change the risk level of your investments as you age. Move more into income production rather than price changes.

If you are really concerned about this, get a good investment guy. They make a world of difference. Need to find one that's about 20 years younger than you, so they don't retire before you don't care anymore.

Actually he is spot on. The biggest risk to a secure retirement is retiring into a down market. (Assuming you had sufficient savings going into that point. If you didn't save much, well there isn't much help for you at this point no matter what.)

The problem with this one scenario is that you are drawing from those funds that are now depressed in value. If you need 50k and you pull it when you fund is worth $1M, then that is 5% of your assets. But if your fund values dropped 20% (not unrealistic in a bear market) to be $800k, then that is 6.25%of your assets. So not only have you taken a larger percentage of your available funds, but now that amount in unavailable to grow back on the rebound. You basically take a double hit if you get caught in this situation.

Can you mitigate it? Sure, to some degree. You can try to take less out, but of course you still have to cover expenses. Can reduce expenses some, but not always easy. You can take a job to get some income to help. Stuff like that, but it is a definite gut punch to those that just retired and were looking forward to a nice relaxing retirement. A down market later in retirement is generally not as big a problem.

 

[Torvy]

This is largely mythical. It assumes situations that tend to be the problem rather than the market.

Dividends pay out on the number of shares you own, not the market value of those shares.

Unless your are in a rare situation where you were expecting to retire in 20 years, but you had an accident and are forced to retire immediately and it happens to be at the trough of a down market, this is fear mongering. When you approach retirement (years before, not days before), you either a) have much more than you really need or (more commonly) b) shift your investments into lower yield, lower risk investments (including, but not limited to more dividends). Those types of investments don't drop 20% in a down market (and/or they dont payout based on market price). Any trained professional will help with this. Heck, many modern funds automatically do this as you approach retirement age. So, when the overall market drops 20%, these either gain or remain unchanged against the stream. They also don't make huge gains, either. There are also other funds that specifically counter big drops using a combination of bond funds and derivatives.

A typical retiree (62-65) should not only have their investments largely crash-resistent, they shouldn't be pulling 5% out all at once. Even if they did and that 5% became 6.25%...that's from 20 years to 16 year of remaining assets...but that's assuming you gain ZERO over those 16-20 years. Since the typical S&P fund returns 10%, you would never run out of that money in your lifetime.

 

[KennyG]

If you need savings in retirement, keep a year or two needs in something like a money market. In good years take income out of equities, in bad years out of fixed income sources.

 

[dstig1]

Not everyone gets to retire willingly when they want. Some for health reasons as you noted, others due to layoffs at a late age where nobody will hire you, but not quite old enough to really retire. I have seen a TON of the latter the past 10 years around here. If it also coincides with a significant down market (a good reason for getting laid off...), yes it can cause problems as things are stacked up against you. How much of a problem depends on the individual situation... For some? No biggie. For others, a real big deal.

 

[zzvyb6]

A lot of people I know had to withdrawn because of year before's income tax debt. Mine is way up. I live off of 4 S.P.I.A.s that pay me 'take home' as much as I earned at GM after 40 years. Ins spite of these withdrawals, my account is still increasing. Now with R.M.W. I've run out of things to buy after a new tractor, NH Stackliner, 20K trailer, hot tub, and a waste oil furnace to name a few. What do you do with $50k in your checking account ?
I recommend you PAY a 'wealth management' company to handle your IRA because their wallet commands a lot better leverage that your own single 'trivial' amount.
You'll sleep better. I feel real bad for my co-workers who took a pension. (no, I actually don't). My 'buy-out' was doubled in 2 years by my investment manger. Now I'm big on donating to new farm 'kids' running from the Michigan blue cities. (I never said that intentionally, it just came out of reality).

 

[CloverKnollFarms]

Investing is what paid for my kids to go to college too. 50% of their tuition was just earnings. Their 529s averaged 11%.

Our HSA investment returns pay for all of our medical expenses, and add to the account balance. Those have averaged 12%. That was one of the best financial decisions I have ever made. It just prints money. Choosing a high deductible plan and investing in the HSA 10 years ago, will help pay for medical expenses for decades to come.

 

[CloverKnollFarms]

I happened to look at our 401k. We have ROTH IRAs and the HSA and a few brokerage accounts too... But the 401k now shows that 25% of its value, is money I actually invested. 75% is match funds or growth.

I retired early, so it will just sit and simmer for another 12 years.

At that point only about 10% of its value, will be the money we invested.

This is what I wish public education would have taught me when I was young. I didn't start really investing until about 15 years ago. In anything.

If you think about purchases in terms of lost opportunity... You realize how expensive things really are, over time.

Spending $15k more on a single new vehicle, over the course of 20 years, is almost $140k

Multiply that by vehicles over a lifetime.

There is your retirement fund

 

[Oaktree]

Actually he is spot on. The biggest risk to a secure retirement is retiring into a down market. (Assuming you had sufficient savings going into that point. If you didn't save much, well there isn't much help for you at this point no matter what.)

I read somewhere that the average 60 year old has less than $50k in retirement savings. Seems pretty short-sighted to me, barring some big inheritance there's almost no way you can catch up at that age. I sure would hate to be 80 and be working because I need to.

A typical retiree (62-65) should not only have their investments largely crash-resistent, they shouldn't be pulling 5% out all at once. Even if they did and that 5% became 6.25%...that's from 20 years to 16 year of remaining assets...but that's assuming you gain ZERO over those 16-20 years. Since the typical S&P fund returns 10%, you would never run out of that money in your lifetime.

Not sure what you mean by "crash resistant". No, you're not gonna lose anything with an annuity or CD but you're not earning much either. Anything else is either subject to the whims of the market or not very liquid (real estate, precious metals, etc.).

 

[CloverKnollFarms]

There is retiring into a bad market, and not actually saving. Most of America never really saved.

I've driven three different vehicles since 2006. Not one cost more than $9000.

That's a year of depreciation on most new vehicles.

My early retirement could be attributed in large part to that choice alone.

 

[CloverKnollFarms]

You can

I read somewhere that the average 60 year old has less than $50k in retirement savings. Seems pretty short-sighted to me, barring some big inheritance there's almost no way you can catch up at that age. I sure would hate to be 80 and be working because I need to.

Not sure what you mean by "crash resistant". No, you're not gonna lose anything with an annuity or CD but you're not earning much either. Anything else is either subject to the whims of the market or not very liquid (real estate, precious metals, etc.).

You can bury cash in the back yard and claim you've lost nothing... Except all the earnings.

What most people "save" is only 10-20% of their total retirement savings (if they are investing) due to compounding. The rest is growth. You can "save" a lot, and still end up poor if you don't make those savings work. Every year inflation makes that savings worth(less)

We tried to be very aggressive, so that we could live on 2-3% of our savings. That way we are insulated not by risk averse investments, but by low withdrawal needs. Allowing those funds to continue to grow.

I'm hoping to leave a lasting legacy as a non college educated child of a poor farming family. My inheritance from my parents will only be their work ethic and spending habits. In the end, that was worth more than any monetary gift.

 

[Torvy]

I read somewhere that the average 60 year old has less than $50k in retirement savings. Seems pretty short-sighted to me, barring some big inheritance there's almost no way you can catch up at that age. I sure would hate to be 80 and be working because I need to.

Not sure what you mean by "crash resistant". No, you're not gonna lose anything with an annuity or CD but you're not earning much either. Anything else is either subject to the whims of the market or not very liquid (real estate, precious metals, etc.).

Crash resistant means things like bond funds that return at a lower rate than most stock funds, but don't drop significantly either. Some specific stock funds tend to run counter (precious metals, for example). Combined with dividend producing stocks, they moderate the effects of market movements. That's why the gross is only about 10% before inflation.

In an aggressive portfolio, I've regularly made 30-45%, but interspersed with some periods of losses. Even with downturns, the market has been very resilient. People tend to lose when they panic and pull money out rather than let it recover...or they foolishly invest in individual stocks that are much more volatile than a fund.

 

[jmc]

Besides buying stocks when there's blood in the streets, another rule of thumb is selling stocks when long term rising prices have sucked about everyone into the market. Might be an urban legend but someone claimed to have avoided the Depression losses by selling out after the shoe shine guy was giving him stock tips.*

*I was reminded of that just before the 2021
dot com bubble burst- two concrete laborers on my job were trading stock tips.

 

[CloverKnollFarms]

When does one buy back in?