Broker Check

Retirement Tragedy #1

Let’s say you have $100,000 in your retirement nest-egg and the market declines 50%. This is a fairly drastic scenario, and these numbers are used for simplicity, but it CAN happen, and has,… recently! So let’s look at this example in more detail.






This represents a market decline of 50%.

Fairly straight forward math, don’t you think? You’ve heard your friends, neighbors, family members, and co-workers complain about it. Perhaps it’s happened to you. “It’ll turn around and grow back,” you’ve heard advisors say. But let’s take a look at what this really means. Because you now have $50,000 left, and you want it to grow back to $100,000, the amount you had before the decline, here’s what has to happen:






This represents a increase of 100%!

In other words, it’s much harder to get it back after you’ve lost it. What we believe is that we should try to help avoid tragic losses. Does this strategy apply to everyone? Probably not. The kind of scenario shown above is also a terrific buying opportunity, and if you’re 35 or 45 years old you may be able to take advantage of this buying opportunity. But if you’re in retirement or close to retirement you may not have that luxury, and it’s even more important to avoid this tragic scenario.

* This example is hypothetical and for illustrative purposes only.  It does not represent any particular investment account or investment outcome.  Your results will vary. No strategy ensures a profit or protect against loss.