8 ms·

Couldn't it be a problem given the concentration of the S&P in these companies? At this point these companies make up a huge portion of 401k's for a huge chunk

by skohan 3mo ago

Couldn't it be a problem given the concentration of the S&P in these companies? At this point these companies make up a huge portion of 401k's for a huge chunk of Americans. How would it affect retirees if they dropped 40-50%, likely taking the market with them?

tyleo 3mo ago
It’s an interesting thought. The growth is so extreme that if the S&P 500 fell 50% today it would reach levels last seen in 2022. Given that the timespan is so short, I’m honestly not sure it would be as bad for 401ks as people expect unless all of your investment was concentrated in the last 4 years. I suppose it’s worse if your calculation is, “I’ll retire when my 401k hits $X absolute value,” but I think most people just retire at a certain age instead with risk spread across decades.
- Imustaskforhelp 3mo ago
  During the dot-com crisis. Nasdaq fell around 78% from its peak and S&P by around 49% so it isn't unprecedented (ironically has both aspects of being both tech and are within the same time-era) It created an actual recession albeit thankfully short one for the case of dotcom (sadly not for 2007) and a really recessionary environment which causes unemployment and just straight up fear and panic. I do understand what you are talking about and overall in long term, perhaps things flatten out but atleast speaking financially so, its better to be on a smooth sailing road rather than insane ups and downs with retirement money if preferable. > I think most people just retire at a certain age instead with risk spread across decades. The issue in my opinion is with people near that certain age you mention and who retire in the time during boom just before bust. They would then get the 50% hit on their savings instantly with an recession/inflation/unemployment environment which in my opinion might be genuinely devastating. (supposing that they had their investments in stocks, I wouldn't consider that any retiree would have all their money in stocks but there have been some other comments which show a sizable amount, @kipchak's comment shows 50% stock for retirement. so a 50% shock on top of that could lead to a wipe out of 25% of your retirement fund which is honestly still pretty crazy.)
  - toomuchtodo 3mo ago
    > (supposing that they had their investments in stocks, I wouldn't consider that any retiree would have all their money in stocks but there have been some other comments which show a sizable amount, @kipchak's comment shows 50% stock for retirement. so a 50% shock on top of that could lead to a wipe out of 25% of your retirement fund which is honestly still pretty crazy.) What do you think the cost would be for protective puts per $1M of equity exposure of a portfolio on a monthly basis? "Bubble Insurance" if you will. Going 100% bonds is simply intolerable for the time window for most retirees, but an equity wipeout of this magnitude is equally intolerable.
    - Marsymars 3mo ago
      > What do you think the cost would be for protective puts per $1M of equity exposure of a portfolio on a monthly basis? "Bubble Insurance" if you will. I expect that would not be a cost-effective way of attaining the risk profile you'd be looking for. I expect there won't be a more cost-effective way of managing your portfolio risk than by simply adjusting your split of broadly-diversified equities vs bonds.
      - intrasight 3mo ago
        My homeowners insurance isn't "cost-effective" either but I still do it. I think the reason that investors don't is because they are greedy or irrational or both. That was the message that I got from a financial podcast I listened to a couple weeks ago anyway.
        duzer65657 3mo ago
        investors are irrational but actually tend to go the other way - too risk adverse. I'm not sure what a "greedy" investor is, TBH.
        intrasight 2mo ago
        Yeah "greedy" is not really the right word. What I meant was not properly managing.
- MattGrommes 3mo ago
  One of the big issues with this is sequence of returns risk. If you retire and rely on your portfolio but the market dives for a year or two right after you leave the workforce, your total portfolio value is screwed because you were selling at a low point.
  - rwmj 3mo ago
    Which is why you keep 3-5 years of spending money in cash (or a bond ladder if you want to be fancy).
    - duzer65657 3mo ago
      most don't even have 3-5 years "spending money" (whatever that is) in total savings; if you're keeping that in cash you're getting 2-3% annually while the market has doubled.
      - hdgvhicv 3mo ago
        People return with less than 4 years expenses in retirement funds Surely you need about 20 years?
        budman1 2mo ago
        Social Security, my friend. And there are still some pensions out there.
      - rwmj 3mo ago
        Sure, but we're not talking about people who have no savings. FIRE people have huge investment portfolios while being frugal with their spending, and understand the risk of keeping 5-10% of their total net worth in cash equivalents (not dissimilar to having insurance).
        deleted 3mo ago
        [deleted]
- zer00eyz 3mo ago
  Inherited IRA's, if you aren't the spouse, have some pretty strict draw down rules. As the boomers die off - if they have these accounts - their kids are quickly going to be forced to liquidate them over the course of 10 years. With some of them having to sell a chunk annually.
swarnie 3mo ago
I'm not familiar with 401k rules but presumably they get a choice of markets and products? If one is over concentrated its easily avoided.
- loudmax 3mo ago
  The employer selects a financial company to manage the 401k. When you switch jobs, you can roll the 401k from the previous employer into the new one, or into an IRA (Individual Retirement Account). Usually the financial services company will offer several options: more aggressive/high risk, or less aggressive/lower risk. Most people will just go with whatever is the default option. So much of the American S&P 500 is dominated by handful of companies that the risk is not that easy to avoid. If or when the AI bubble pops, it's going to take down a lot of the economy with it. You can direct your retirement savings into the lowest yield/lowest risk assets offered by the firm, but you'll forego whatever growth happens in the mean time. Will the bubble pop next week? Next month? Next year? Who knows. Timing the market is incredibly difficult. There's a famous quote, attributed (perhaps apocryphally) to John Maynard Keynes: "The market can remain irrational longer than you can remain solvent."
  - TitaRusell 3mo ago
    The whole idea of a pension fund is that you don't need to time the system it is the system. Like my country pension scheme. It went through ups and downs for a hundred years but has always come on top. All you need is a long horizon and a trillion dollars and you basically can't lose.
- skohan 3mo ago
  The problem some have pointed out is that these companies are such a huge portion of the market right now. The sound advice for the past decades has been, just invest in a low-cost ETF tracking the S&P instead of picking stocks to minimize risk and invest in the market broadly. So a huge number of people have done that, believing they're diversified, while tech makes up 40% of the index. Yes you could sell your S&P and find things to invest in least likely to be impacted by a potential bubble, but your average 9-5'er with automated contributions to their 401k is probably not sophisticated enough to do that. And that's assuming only these companies would be affected if there was a massive draw-down in tech/AI related stocks. We haven't really seen a situation like this before, so it's not easy to predict what effects there might be in the broader economy.
riffraff 3mo ago
NVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retirement funds by itself. If you take an all world index, it's even less. Still, if NVidia lost 50% of their market share, we would probably see a big collapse of the stock market. EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI".
- bdangubic 3mo ago
  how are they not “mostly AI”?
  - riffraff 2mo ago
    Amazon, Microsoft, Meta, Alphabet sell a lot more things than AI. They were huge before and would still be huge after. Do you think iphones and windows™ will stop selling once the ai bubble pops?
- conartist6 3mo ago
  Idunno man. Am I the only one that remembers the day the first DeepSeek model came out? It wasn't like, "Nvidia took a hit and everyone else was fine". It was more like, "One or two companies were fine, and ALL others took a hit"
- kipchak 3mo ago
  Regarding unprecedented concentration, wasn't the nifty fifty era comparable for the top 10, about 40%?
  - riffraff 2mo ago
    I frankly don't know, the "unprecedented" is something I read in articles but haven't actually investigated.
    - kipchak 2mo ago
senshan 3mo ago
For those who stick to a meaningful asset allocation (e.g. 60/40, 80/20, etc), this does not pose significant problem -- they would not be buying much stock in the last 3 years. Instead, they would be buying mostly fixed-income. Probably mostly in 401k/IRA accounts.
- mint5 3mo ago
  But if their debt goes bad, isn’t that debt the very bonds that make up the other part of those asset allocations?
  - senshan 3mo ago
    Typical total bond market fund like BND is ~70% in USG -- pretty solid: https://investor.vanguard.com/investment-products/etfs/profile/bnd#portfolio-composition https://investor.vanguard.com/investment-products/etfs/profi...
anthonypasq 3mo ago
retirees arent suppose to have their active retirement funds in stocks dude. Any financial advisor with a brain would not make such a ridiculous asset allocation error.
- kipchak 3mo ago
  Regardless of whether it's a good idea, it absolutely happens and as a result would impact retirees, both in individually managed accounts and target date funds. For example here 70+ are 45% equity.[1] TROW retirement 2020 funds are about 50% stock, for example, and only decrease to a floor of 30%. https://workplace.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2025/has/2025_How_America_Saves.pdf https://workplace.vanguard.com/content/dam/inst/iig-transfor... (page 78)
noelsusman 3mo ago
Retirees relying on short term equity returns to cover expenses only have themselves to blame.
minimaltom 3mo ago
Even if theres a massive drawdown it will recover in the medium term (and in the short term is a great buying opportunity). For the people who are close/early to retirement and can't do that, well, they need to manage sequence of returns risk. Edit: I think some ppl might interpret this as me being bullish on the SP500. I'm not, I'm bullish on everything evens out and returns to the mean.
hualapais 3mo ago
I suggest looking into “EQL”, or better yet, just replicating its index by taking a position in the 11 XL* sector funds from SPDR, allocating equal weighting to each. One will end up with one’s equities equal weighted by sector and with plenty of large cap exposure, as opposed to the pronounced mid-cap tilt found in whole market equal-weight strategies. Personally, I drop the financial sector entirely (Thomistic prohibitions on usury) which leaves an even 10 funds which is easy to allocate mentally and in practice. For example, assuming a 60/40 allocation where one is holding the lion’s share in equities and the remainder in bonds (I substitute with a combination of gold, crypto, cash, and Swiss Franc here), one would allocate as follows: XLC 6% XLY 6% XLP 6% XLE 6% XLV 6% XLI 6% XLB 6% XLK 6% XLU 6% XLRE 6% (Note that XLF is consciously not taken as a position here, decide if it’s right for you. The Mortgate REITs which would make XLRE problematic are in XLF per the sector selection rules) The remaining 40% is bonded debt if you are fine with usury, or some sort of asset negatively or neutrally correlated to equities.
- rocho 3mo ago
  Why do you consider bonds usury?
  - michaelt 3mo ago
    In many historical societies, religious prohibitions on usury meant the charging of interest of any kind. Jump in a time machine to 1515 and ask Martin Luther, or to 1260 and ask Thomas Aquinas, they'd tell you it's sinful. And in the present age, a fair number of Islamic folk consider interest against their religion's rules. So there's a Halal finance industry where, for example, you can get a "murabahah contract" where the bank buys a house, then sells the house to you at a higher price, while allowing you to pay them in monthly instalments.
    - Exoristos 3mo ago
      Older than any of those: "Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of any thing that is lent upon interest" (Deut 23.20 JPS Tanakh).
MikeNotThePope 3mo ago
I don’t think concentration risk is itself overly concerning. The nature of a market cap weighted index means it will always be heavy on whatever is currently trending. You’ll certainly be hurting if your plan is to retire at the top of the market with just enough, as the inevitable downturn will hammer your portfolio down into not enough. So invest until you have enough to handle volatility or a lost decade with a dip and slow recovery.
epolanski 3mo ago
There is no data showing that high concentration is bad in an index. No correlation with future returns. On the other hand the world is leveraged to insane levels not seen since world wars or global recessions. At the same time yields are low while inflation is high. There is definitely a high level of risk in the financial markets. A risk nobody, especially politicians, want to look at, because it would unavoidably lead to some major pains, so procrastinating until it's unavoidable seems the way to go.
magicbook 3mo ago
Isn't that considered a likely case? I always assume that my sp500 holdings are worth roughly half of what they are (and base retirement and spending decisions on that number). and most financial advisors will tell you future returns of sp500 for 10 years out will barely keep pace with inflation, if that.
fsckboy 3mo ago
>How would it affect retirees if they dropped 40-50%, likely taking the market with them? a drop of 40-50% in the S&P 500!? That didn't even happen in the market crash of 1929. It would lead to unemployment and breadlines for the majority of the population, and retirees would get in line like everybody else. Making income from your savings requires a productive economy; bonds are not the answer because bonds also stop getting paid, and even govt bonds would be erased by inflation. it's just not a scenario that should be on your radar, the chance is tiny, and the result would be completely non-linear. if you tried to hedge yourself against that, not only would you fail (it's simply out of your control, like an earthquake or tornado), you also wouldn't make any income in good times, and most times are good and it's sensible to plan for that retirement.
- kbcool 2mo ago
  The S&P 500 has dropped over 40% multiple times including 1929. It did it in the 70s, 2000 and 2008/9. The COVID crash nearly hit those levels also

by skohan 3mo ago

tyleo 3mo ago

It’s an interesting thought. The growth is so extreme that if the S&P 500 fell 50% today it would reach levels last seen in 2022. Given that the timespan is so short, I’m honestly not sure it would be as bad for 401ks as people expect unless all of your investment was concentrated in the last 4 years. I suppose it’s worse if your calculation is, “I’ll retire when my 401k hits $X absolute value,” but I think most people just retire at a certain age instead with risk spread across decades.

Imustaskforhelp 3mo ago
During the dot-com crisis. Nasdaq fell around 78% from its peak and S&P by around 49% so it isn't unprecedented (ironically has both aspects of being both tech and are within the same time-era) It created an actual recession albeit thankfully short one for the case of dotcom (sadly not for 2007) and a really recessionary environment which causes unemployment and just straight up fear and panic. I do understand what you are talking about and overall in long term, perhaps things flatten out but atleast speaking financially so, its better to be on a smooth sailing road rather than insane ups and downs with retirement money if preferable. > I think most people just retire at a certain age instead with risk spread across decades. The issue in my opinion is with people near that certain age you mention and who retire in the time during boom just before bust. They would then get the 50% hit on their savings instantly with an recession/inflation/unemployment environment which in my opinion might be genuinely devastating. (supposing that they had their investments in stocks, I wouldn't consider that any retiree would have all their money in stocks but there have been some other comments which show a sizable amount, @kipchak's comment shows 50% stock for retirement. so a 50% shock on top of that could lead to a wipe out of 25% of your retirement fund which is honestly still pretty crazy.)
- toomuchtodo 3mo ago
  > (supposing that they had their investments in stocks, I wouldn't consider that any retiree would have all their money in stocks but there have been some other comments which show a sizable amount, @kipchak's comment shows 50% stock for retirement. so a 50% shock on top of that could lead to a wipe out of 25% of your retirement fund which is honestly still pretty crazy.) What do you think the cost would be for protective puts per $1M of equity exposure of a portfolio on a monthly basis? "Bubble Insurance" if you will. Going 100% bonds is simply intolerable for the time window for most retirees, but an equity wipeout of this magnitude is equally intolerable.
  - Marsymars 3mo ago
    > What do you think the cost would be for protective puts per $1M of equity exposure of a portfolio on a monthly basis? "Bubble Insurance" if you will. I expect that would not be a cost-effective way of attaining the risk profile you'd be looking for. I expect there won't be a more cost-effective way of managing your portfolio risk than by simply adjusting your split of broadly-diversified equities vs bonds.
    - intrasight 3mo ago
      My homeowners insurance isn't "cost-effective" either but I still do it. I think the reason that investors don't is because they are greedy or irrational or both. That was the message that I got from a financial podcast I listened to a couple weeks ago anyway.
      - duzer65657 3mo ago
        investors are irrational but actually tend to go the other way - too risk adverse. I'm not sure what a "greedy" investor is, TBH.
        intrasight 2mo ago
        Yeah "greedy" is not really the right word. What I meant was not properly managing.
MattGrommes 3mo ago
One of the big issues with this is sequence of returns risk. If you retire and rely on your portfolio but the market dives for a year or two right after you leave the workforce, your total portfolio value is screwed because you were selling at a low point.
- rwmj 3mo ago
  Which is why you keep 3-5 years of spending money in cash (or a bond ladder if you want to be fancy).
  - duzer65657 3mo ago
    most don't even have 3-5 years "spending money" (whatever that is) in total savings; if you're keeping that in cash you're getting 2-3% annually while the market has doubled.
    - hdgvhicv 3mo ago
      People return with less than 4 years expenses in retirement funds Surely you need about 20 years?
      - budman1 2mo ago
        Social Security, my friend. And there are still some pensions out there.
    - rwmj 3mo ago
      Sure, but we're not talking about people who have no savings. FIRE people have huge investment portfolios while being frugal with their spending, and understand the risk of keeping 5-10% of their total net worth in cash equivalents (not dissimilar to having insurance).
      - deleted 3mo ago
        [deleted]
zer00eyz 3mo ago
Inherited IRA's, if you aren't the spouse, have some pretty strict draw down rules. As the boomers die off - if they have these accounts - their kids are quickly going to be forced to liquidate them over the course of 10 years. With some of them having to sell a chunk annually.

swarnie 3mo ago

I'm not familiar with 401k rules but presumably they get a choice of markets and products? If one is over concentrated its easily avoided.

loudmax 3mo ago
The employer selects a financial company to manage the 401k. When you switch jobs, you can roll the 401k from the previous employer into the new one, or into an IRA (Individual Retirement Account). Usually the financial services company will offer several options: more aggressive/high risk, or less aggressive/lower risk. Most people will just go with whatever is the default option. So much of the American S&P 500 is dominated by handful of companies that the risk is not that easy to avoid. If or when the AI bubble pops, it's going to take down a lot of the economy with it. You can direct your retirement savings into the lowest yield/lowest risk assets offered by the firm, but you'll forego whatever growth happens in the mean time. Will the bubble pop next week? Next month? Next year? Who knows. Timing the market is incredibly difficult. There's a famous quote, attributed (perhaps apocryphally) to John Maynard Keynes: "The market can remain irrational longer than you can remain solvent."
- TitaRusell 3mo ago
  The whole idea of a pension fund is that you don't need to time the system it is the system. Like my country pension scheme. It went through ups and downs for a hundred years but has always come on top. All you need is a long horizon and a trillion dollars and you basically can't lose.
skohan 3mo ago
The problem some have pointed out is that these companies are such a huge portion of the market right now. The sound advice for the past decades has been, just invest in a low-cost ETF tracking the S&P instead of picking stocks to minimize risk and invest in the market broadly. So a huge number of people have done that, believing they're diversified, while tech makes up 40% of the index. Yes you could sell your S&P and find things to invest in least likely to be impacted by a potential bubble, but your average 9-5'er with automated contributions to their 401k is probably not sophisticated enough to do that. And that's assuming only these companies would be affected if there was a massive draw-down in tech/AI related stocks. We haven't really seen a situation like this before, so it's not easy to predict what effects there might be in the broader economy.

riffraff 3mo ago

NVidia makes up 7.5% of the SP500. If it lost 50%, it would be a 3% loss for the index. The concentration is bad, but it would not cause a drop of 50% retirement funds by itself. If you take an all world index, it's even less. Still, if NVidia lost 50% of their market share, we would probably see a big collapse of the stock market. EDIT: to note, the top ten companies in SP500 make up an unprecedented concentration but they're not "mostly AI".

bdangubic 3mo ago
how are they not “mostly AI”?
- riffraff 2mo ago
  Amazon, Microsoft, Meta, Alphabet sell a lot more things than AI. They were huge before and would still be huge after. Do you think iphones and windows™ will stop selling once the ai bubble pops?
conartist6 3mo ago
Idunno man. Am I the only one that remembers the day the first DeepSeek model came out? It wasn't like, "Nvidia took a hit and everyone else was fine". It was more like, "One or two companies were fine, and ALL others took a hit"
kipchak 3mo ago
Regarding unprecedented concentration, wasn't the nifty fifty era comparable for the top 10, about 40%?
- riffraff 2mo ago
  I frankly don't know, the "unprecedented" is something I read in articles but haven't actually investigated.
  - kipchak 2mo ago

senshan 3mo ago

For those who stick to a meaningful asset allocation (e.g. 60/40, 80/20, etc), this does not pose significant problem -- they would not be buying much stock in the last 3 years. Instead, they would be buying mostly fixed-income. Probably mostly in 401k/IRA accounts.

mint5 3mo ago
But if their debt goes bad, isn’t that debt the very bonds that make up the other part of those asset allocations?
- senshan 3mo ago
  Typical total bond market fund like BND is ~70% in USG -- pretty solid: https://investor.vanguard.com/investment-products/etfs/profile/bnd#portfolio-composition https://investor.vanguard.com/investment-products/etfs/profi...

anthonypasq 3mo ago

retirees arent suppose to have their active retirement funds in stocks dude. Any financial advisor with a brain would not make such a ridiculous asset allocation error.

kipchak 3mo ago
Regardless of whether it's a good idea, it absolutely happens and as a result would impact retirees, both in individually managed accounts and target date funds. For example here 70+ are 45% equity.[1] TROW retirement 2020 funds are about 50% stock, for example, and only decrease to a floor of 30%. https://workplace.vanguard.com/content/dam/inst/iig-transformation/insights/pdf/2025/has/2025_How_America_Saves.pdf https://workplace.vanguard.com/content/dam/inst/iig-transfor... (page 78)

noelsusman 3mo ago

Retirees relying on short term equity returns to cover expenses only have themselves to blame.

minimaltom 3mo ago

Even if theres a massive drawdown it will recover in the medium term (and in the short term is a great buying opportunity). For the people who are close/early to retirement and can't do that, well, they need to manage sequence of returns risk. Edit: I think some ppl might interpret this as me being bullish on the SP500. I'm not, I'm bullish on everything evens out and returns to the mean.

hualapais 3mo ago

I suggest looking into “EQL”, or better yet, just replicating its index by taking a position in the 11 XL* sector funds from SPDR, allocating equal weighting to each. One will end up with one’s equities equal weighted by sector and with plenty of large cap exposure, as opposed to the pronounced mid-cap tilt found in whole market equal-weight strategies. Personally, I drop the financial sector entirely (Thomistic prohibitions on usury) which leaves an even 10 funds which is easy to allocate mentally and in practice. For example, assuming a 60/40 allocation where one is holding the lion’s share in equities and the remainder in bonds (I substitute with a combination of gold, crypto, cash, and Swiss Franc here), one would allocate as follows: XLC 6% XLY 6% XLP 6% XLE 6% XLV 6% XLI 6% XLB 6% XLK 6% XLU 6% XLRE 6% (Note that XLF is consciously not taken as a position here, decide if it’s right for you. The Mortgate REITs which would make XLRE problematic are in XLF per the sector selection rules) The remaining 40% is bonded debt if you are fine with usury, or some sort of asset negatively or neutrally correlated to equities.

rocho 3mo ago
Why do you consider bonds usury?
- michaelt 3mo ago
  In many historical societies, religious prohibitions on usury meant the charging of interest of any kind. Jump in a time machine to 1515 and ask Martin Luther, or to 1260 and ask Thomas Aquinas, they'd tell you it's sinful. And in the present age, a fair number of Islamic folk consider interest against their religion's rules. So there's a Halal finance industry where, for example, you can get a "murabahah contract" where the bank buys a house, then sells the house to you at a higher price, while allowing you to pay them in monthly instalments.
  - Exoristos 3mo ago
    Older than any of those: "Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals, interest of any thing that is lent upon interest" (Deut 23.20 JPS Tanakh).

MikeNotThePope 3mo ago

I don’t think concentration risk is itself overly concerning. The nature of a market cap weighted index means it will always be heavy on whatever is currently trending. You’ll certainly be hurting if your plan is to retire at the top of the market with just enough, as the inevitable downturn will hammer your portfolio down into not enough. So invest until you have enough to handle volatility or a lost decade with a dip and slow recovery.

epolanski 3mo ago

There is no data showing that high concentration is bad in an index. No correlation with future returns. On the other hand the world is leveraged to insane levels not seen since world wars or global recessions. At the same time yields are low while inflation is high. There is definitely a high level of risk in the financial markets. A risk nobody, especially politicians, want to look at, because it would unavoidably lead to some major pains, so procrastinating until it's unavoidable seems the way to go.

magicbook 3mo ago

Isn't that considered a likely case? I always assume that my sp500 holdings are worth roughly half of what they are (and base retirement and spending decisions on that number). and most financial advisors will tell you future returns of sp500 for 10 years out will barely keep pace with inflation, if that.

fsckboy 3mo ago

>How would it affect retirees if they dropped 40-50%, likely taking the market with them? a drop of 40-50% in the S&P 500!? That didn't even happen in the market crash of 1929. It would lead to unemployment and breadlines for the majority of the population, and retirees would get in line like everybody else. Making income from your savings requires a productive economy; bonds are not the answer because bonds also stop getting paid, and even govt bonds would be erased by inflation. it's just not a scenario that should be on your radar, the chance is tiny, and the result would be completely non-linear. if you tried to hedge yourself against that, not only would you fail (it's simply out of your control, like an earthquake or tornado), you also wouldn't make any income in good times, and most times are good and it's sensible to plan for that retirement.

kbcool 2mo ago
The S&P 500 has dropped over 40% multiple times including 1929. It did it in the 70s, 2000 and 2008/9. The COVID crash nearly hit those levels also