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How on earth could a retirement savings have been totally wiped out by the 2008 financial crisis? If you had bought at the peak and sold at the bottom (unlikely

How on earth could a retirement savings have been totally wiped out by the 2008 financial crisis? If you had bought at the peak and sold at the bottom (unlikely for a retirement account), you'd have lost at most 50% of your value. Holding on 5 more years and you'd be totally recovered.

sct202 8y ago
They probably didn't have a whole lot of buffer when they retired, so having a drop of half right when they start to use the money could cause their fund to become unsustainable. Plus a lot of older people tend to rebalance towards bonds when they retire, so if they did that at 2008/2009 they wouldn't have gotten to recover as much from the stock markets in 2010+.
- qeternity 8y ago
  If they were retiring within 5 years and had substantial equity holdings, then this is the real problem. They should have been mostly in credit and as rates plummeted, credit rallied. They would have done quite well.
  - maxxxxx 8y ago
    "They should have been mostly in credit and as rates plummeted, credit rallied. They would have done quite well." That's the thing with investment advice. There is a lot of "should" and "would" advice in hindsight but not so much concrete advice about the now. Also, if you just have a major medial issue, all your well-laid plans will be moot. We are engaging in a massive financial experiment over the last few decades. I know people who started working in the 80s and did extremely well. But they started from a low stock market, had massive housing appreciation and didn't have huge college debt. If you started working in 2000 with a Dow of 11000 the picture is less pretty. And for people who are starting now it's just plain ugly. Houses are already super expensive, they have college debt and the stock market is expensive. They won't see the growth the people who started in the 80s saw. But somehow they are still held to the same standards.
    - mlthoughts2018 8y ago
      Unexpected legal expenses, medical expenses, family emergencies, all with money locked away behind 401(k) rules and penalties. As I mentioned in another comment, my grandparents had gone to some retail financial planner like Edward Jones or something, small town, some guy whose family they knew, and he just turned out to be deeply incompetent. Imagine being elderly and not personally competent to understand ideas like the relative risk of equity or bond portfolios, and your children are equally as incompetent and can’t really help you, and the local options for financial planners are also equally as incompetent. That’s the picture for the vast majority of people counting on using 401(k) for retirement. They don’t know if they’re in high fee equity portfolios or low fee index replication or bonds etc. They don’t understand any of that very well. They just take what the employer gives them, unwittingly own a bunch of random crap, and hope they got lucky and everything went up enough, or that someone with decent financial skill gave them sound advice. Note that this is also a big part of how unicorn companies externalize losses to the public. Jack up the price of Uber or Spotify or something, and a while after it has gone public, nearing the time when employee lockup periods are over, random retirees and teachers and firefighters or whatever all unwittingly end up owning shares of this stuff from broad funds they don’t understand via their retirement plan. Then the unicorn undergoes a massive correction in valuation, but investors and choice employees were allowed to sell at the known inflated prices, meanwhile the buy and hold people unwittingly owning it via a 401(k) just eat the losses.
      - maxxxxx 8y ago
        "Imagine being elderly and not personally competent to understand ideas like the relative risk of equity or bond portfolios, and your children are equally as incompetent and can’t really help you, and the local options for financial planners are also equally as incompetent. " And how do you find a someone financially competent? Even a lot of the superstars blow up eventually. I think it's just a gamble. There is a ton of cargoculting going on in financial advice. In the end nobody knows how to do it right long-term.

sct202 8y ago

They probably didn't have a whole lot of buffer when they retired, so having a drop of half right when they start to use the money could cause their fund to become unsustainable. Plus a lot of older people tend to rebalance towards bonds when they retire, so if they did that at 2008/2009 they wouldn't have gotten to recover as much from the stock markets in 2010+.

qeternity 8y ago
If they were retiring within 5 years and had substantial equity holdings, then this is the real problem. They should have been mostly in credit and as rates plummeted, credit rallied. They would have done quite well.
- maxxxxx 8y ago
  "They should have been mostly in credit and as rates plummeted, credit rallied. They would have done quite well." That's the thing with investment advice. There is a lot of "should" and "would" advice in hindsight but not so much concrete advice about the now. Also, if you just have a major medial issue, all your well-laid plans will be moot. We are engaging in a massive financial experiment over the last few decades. I know people who started working in the 80s and did extremely well. But they started from a low stock market, had massive housing appreciation and didn't have huge college debt. If you started working in 2000 with a Dow of 11000 the picture is less pretty. And for people who are starting now it's just plain ugly. Houses are already super expensive, they have college debt and the stock market is expensive. They won't see the growth the people who started in the 80s saw. But somehow they are still held to the same standards.
  - mlthoughts2018 8y ago
    Unexpected legal expenses, medical expenses, family emergencies, all with money locked away behind 401(k) rules and penalties. As I mentioned in another comment, my grandparents had gone to some retail financial planner like Edward Jones or something, small town, some guy whose family they knew, and he just turned out to be deeply incompetent. Imagine being elderly and not personally competent to understand ideas like the relative risk of equity or bond portfolios, and your children are equally as incompetent and can’t really help you, and the local options for financial planners are also equally as incompetent. That’s the picture for the vast majority of people counting on using 401(k) for retirement. They don’t know if they’re in high fee equity portfolios or low fee index replication or bonds etc. They don’t understand any of that very well. They just take what the employer gives them, unwittingly own a bunch of random crap, and hope they got lucky and everything went up enough, or that someone with decent financial skill gave them sound advice. Note that this is also a big part of how unicorn companies externalize losses to the public. Jack up the price of Uber or Spotify or something, and a while after it has gone public, nearing the time when employee lockup periods are over, random retirees and teachers and firefighters or whatever all unwittingly end up owning shares of this stuff from broad funds they don’t understand via their retirement plan. Then the unicorn undergoes a massive correction in valuation, but investors and choice employees were allowed to sell at the known inflated prices, meanwhile the buy and hold people unwittingly owning it via a 401(k) just eat the losses.
    - maxxxxx 8y ago
      "Imagine being elderly and not personally competent to understand ideas like the relative risk of equity or bond portfolios, and your children are equally as incompetent and can’t really help you, and the local options for financial planners are also equally as incompetent. " And how do you find a someone financially competent? Even a lot of the superstars blow up eventually. I think it's just a gamble. There is a ton of cargoculting going on in financial advice. In the end nobody knows how to do it right long-term.