Reading Time: 2 minutesWSJ ran an interesting article “Retiring Boomers Find 401(k) Plans Fall Short” over the weekend (link here, if not work please google the article to get it). I felt sorry to read this:
…Gloria Moss has been contributing to a 401(k) since 1985, when she went back to work after having children. Especially after divorcing, she wasn’t able to contribute as much as she wished and when her children finished college, she focused on repaying college loans. She says she lost more than half her savings in the recent financial crisis, then shifted heavily to bonds and missed the stock rebound…
Two things quickly came to my mind:
1) It’s hard for people nearing retirement age to hold on their investment when the market drop like a rock, during the recent financial crisis (Fall 2008 to Spring 2009) I knew I would not hold on to my 401k if I were 20 years older. In order to sleep better at night, they sold their investments at the market low, because they just could not take it any more. I can fully understand the emotion here. For instance, someone used to have $600,000 in his/her retirement account before all this happens, and in financial crisis it dropped to $300,000, the person still prefer to have $300,000 over the potential “nothing left”.
2) The second point, by the same token, people who bailed out at low are unlikely to jump back into market, when the market turns. On the other hand, people who are in the loop (wall street?), and young people are more likely jump back in. The former took the cue from all the government and fed actions, the latter can take more risk because they have more time (to invest and recoup the loss).
Long story short, it seems the boomers got squeezed in this financial crisis. One plus side they have, is for those near retirement age, they can be sure the social security will still be there.
