Decade of Losses Forces Investors in Their 30s to Start All Over
April 16th, 2009Via: Bloomberg:
Jason Woodward has barely broken even after dutifully pumping money into his 401(k) retirement account for about 10 years.
“I may be a little bit ahead, but not much,” said Woodward, 39, an employee of United Construction & Engineering Inc. in Torrington, Connecticut.
He’s better off than many 401(k) investors in their 30s who began saving a decade ago, according to data compiled by the Center for Retirement Research at Boston College. A median- income worker who put 9 percent of salary into an all-stock plan would have finished the decade ended March 31 with almost $10,000 less than he or she invested, a loss of 26 percent, the center found. With investments divided equally between stocks and bonds, the drop would have been 3.9 percent.
“There are days when it makes me extremely nervous,” said Woodward, whose wife, a state government worker, has her own retirement plan. “I am glad I am not retiring tomorrow.”
Investors in their 30s were too young to build their retirement accounts in the rising stock market of the 1980s and 1990s. Over those two decades, the Standard & Poor’s 500 Index climbed an average of 18 percent a year, including reinvested dividends, according to data compiled by Bloomberg. In the 2000s through March 31, the benchmark fell 4.7 percent annually.
‘High-Stakes Crapshoot’
U.S. Representative George Miller, a California Democrat, held a hearing in February to highlight what he described as the shortcomings of 401(k) plans. Miller, chairman of the House Education and Labor Committee, called the plans “little more than a high-stakes crapshoot.”
