Last week the stock market whipsawed back and forth. As of today, the S&P 500 is down from its peak earlier this summer. After experiencing the downturns of 2000-2002 and 2007-2008, I am sure there are a lot of people very nervous about their retirement savings right now. Will the markets continue to climb or will they fall?
Source: Yahoo Finance
I personally think that it is a shame that we have been conditioned to believe that investing in this risky, volatile asset class is the best way to save for retirement. It doesn’t have to be this way! If I put $10,000 aside for retirement, I shouldn’t have to worry about the markets collapsing and turning my $10,000 into $7,000 by this time next year. In what world is this ok?
Companies used to offer pensions and they took care of their employees when they retired. Nowadays, with IRA and 401(k) plans, the burden of saving for retirement has shifted from the employer to the employee. Worse yet, these company sponsored retirement plans simply offer up a selection of Wall Street investments for you to choose from.
IRA and 401(k) plans have been a boon for Wall St. The entire baby boom generation was in the workforce as the new laws passed that put these plans into force. All of the boomers shifted their retirement savings into the market artificially fueling the growth of the market through the 80’s, 90’s, and 00’s. Now as the first of the baby boom begins to retire and take their money out of the market, do you really think that the market can maintain this high rate of growth? Are you willing to bet your retirement savings on it?
Back when companies actually saved up to pay their employee pension benefits, do you think they invested their employee’s future benefits in Wall Street investments? No.
They didn’t. Why should you?