Okay, I’ll bite, why should you? Fact is you shouldn’t.
I keep reading about individuals in their 40s, 50s, even early sixties who feel their retirement has gone up in smoke because of the stock market gyrations in 2020. Get a grip folks.
A few surveys show people abandoning the stock market or shifting from stocks to bonds.
Yes, some people have faced a financial crisis, lost jobs with debt accumulating, but most will recover although it will take time. But for the bulk of Americans a drop in their retirement savings is not a crisis albeit a scary experience.
Let’s look at investing in the S&P Index over the last one hundred years. Assume in each year you started with $10.00 and invested only $10.00 each month (inflation adjusted). Here is what you would have in 2020 considering dividends and capital gains, inflation and taxes.
- 1920 $735,238
- 1930 $384,285
- 1940 $237,919
- 1950 $116,302
- 1960 $65,740
- 1970 $47,583
- 1980 $27,814
- 1990 $11,452
- 2000 $5,412
- 2010 $2,701
All for ten dollars a month (adjusted for inflation). These calculations come from the periodic reinvestment calculator.
Looking at a more realistic investing scenario, let’s say you started saving $100 a month (adjusted for inflation) at age 25 in 1955 and retire in 2020. You would have $812,561.
So, is there any time it’s not worth using the stock market. Well, you may say, what if the market tanks just before I want to retire? I’d say,
- As you get near retirement you should lower your stock investments by investing in bonds or similar investments to lessen your risk.
- You aren’t going to use all your money the year you retire (I hope) so there is still time to recover.
- Build an emergency fund so, if necessary, you can limit your retirement account withdrawals for several months.