Given Up Hope on Retirement?

Despite the economy, you can play catch-up with your investments. Here's how.

people wait in line for food in hugo colorado on Aug. 6 - for gallery on recession and unemployment when americans ask "what about us?"

PHOTOS

The Economy: What About Us?

Technically, the nation's financial health is getting better. But statistics are cold comfort for Americans who are still struggling to make ends meet.

Quiz: How Savings-Savvy Are You?

By Linda Stern | Newsweek Web Exclusive

Sep 19, 2009

Email To A Friend

Please fill in the following information and we'll email this link.

SPONSORED BY

By now, many retirement savers have seen the grim math: lose 50 percent of your portfolio and you have to earn 100 percent to get back to where you should be. How long is that going to take?

For many investors it could take years. From its peak in October 2007, the Standard and Poor's 500 Index lost 57 percent until finally bottoming out on March 9 of this year. It has since rallied, but the S&P is still down about a third from its high.

Retirement accounts have fared a bit better. Buoyed by continuing contributions (most workers did not cut their contributions or change their investment choices during the rout, according to a survey by Hewitt Associates published in May), and because very few 401(k)s are invested solely in the hard-hit S&P, they've lost less and recovered more. At the end of the second quarter of this year, the average 401(k) account was off about 22 percent from where it stood at the end of 2007, according to Fidelity Investments. That means a middle-of-the-road retirement saver could recover in less than two years, if she continued to make contributions, received a company match, and saw typical long-term returns in her well-balanced portfolio. At least, those were the findings of a study published earlier this year by the Employee Benefit Research Institute.

But the recovery time for anyone who isn't Ms. Median could be far shorter or longer, and which it is depends on how old you are and how much money you had before the crisis began. The younger you are and the less you'd saved, the faster you'll recover—some of the youngest workers may have already recovered. Older savers who are already in or near retirement will take longer to rebuild. Folks over 56 who had all their money in the stock market "really got creamed" and will take the longest to regain what they lost, says Jack VanDerhei of the Employee Benefit Research Institute.

Investors who want to crunch their own numbers can try some of the new how-long-to-recoup calculators that have started populating the Web. There's one designed by the investment firm T. Rowe Price at Kiplinger.com, another at Principal Financial Group, and a third at the financial software group Ativa's site.

What's the best way to rebuild your nest egg? According to most financial advisers, don't lament the tumult of the last year or try too hard to profit from short-term share prices going forward. Instead, they say, clients should simply stick with their plans: save and invest more, spend less, and try not to worry about the ups and downs that will always be a part of the financial markets.

Member Comments

- Reply
- Report Abuse
Posted By: memo02 @ 10/09/2009 8:48:09 AM

Sorry folks but the suppoters was to send back to the blak hole !.
Be carefull for what you wish..
- Reply
- Report Abuse
Posted By: goody51boo @ 09/27/2009 11:49:40 PM

Folks, before you bet on stocks at the top like this, please learn about the real problem in the economy. This is a secular bear market that is caused by deflation in bank credit. It is NOT going to recover that easily. Say goodbye to life as you know it. Home sales are the engine of this economy! When we borrow, banks create new money! They do not lend existing money.

Here is how banks create money:

http://www.tradingstocks.net/html/banks_create_money.html

New money makes the economy good. Whatever good days you have seen in your life was because people borrowed more and more exponentially! Read about the way government and the FED uses home sales as a way to create money and inject into economy:

http://www.tradingstocks.net/html/housing_market_bubble_bust_cyc.html

This is why the government is trying to propel the home prices up again! They don't want affordable housing! They want EXPENSIVE HOUSING. Home prices MUST go up and we MUST keep buying faster and more to sustain the fake recovery. That is not happening. The crash will be worse then Great Depression. Some are shorting the market:

http://www.tradingstocks.net/html/latest_opinion.html

Deflation is a MAJOR threat now! All the money FED prints is not making a blip in inflation! There is still a bubble in housing and stocks. It is a bubble that was inflated for 50 years! make no mistake, it will deflate.

http://www.tradingstocks.net/html/near_bottom.html
- Reply
- Report Abuse
Posted By: phiomalibu @ 09/22/2009 3:26:57 AM

I hate to say this, but since American companies have shipped most of the American jobs overseas, there really isn't any money here in America to do much of anything. One thing I am doing is boycotting the companies I know that offshore jobs.
I don't buy new clothes anymore, or go to the movies, I cut my electric bill in half. I don't buy as many shoes as I used to, I just keep the ones I have in good condition. The noveaux rich companies and Ceo's and CIo's who have imported all the workers from other countries and offshored all the IT and manufacturing jobs won't get much money from me any more. I would advise most people to also take their money out of the Stock Market and 401K's and put it in something that will have a return in the next 10 years. The markets are overinflated and the banks and reserve board keep printing money, but to trade currency or buy gold now, or invest in the international portion of the internet. Those are your safest bets. I really feel sorry for those who are heavily invested in the stock market because it is all being held up artificially. One day a president will come along and begin rebuilding America's manufacturing base, and will stop programs like the H1-B visa program, and ensure that the slave labor camps in America and abroad will end. I hope that day comes soon. In the meantime, I won't be buying much, and I urge others to do the same. We need to send a clear message to the CEO's and board members that they are screwing America, just for a few more grand in their Christmas bonuses.