I was listening to CNBC radio this morning and heard some people talking about retirement goals. Specifically, they were discussing how much harder it has become to reach them. Especially for the younger generations.
Although the baby boomers have had some setbacks, they haven’t taken it on the chin like the next generation – which I think they referred to as Generation X. It got me thinking that I have really put up a mental block of my own when it comes to my retirement goals. While things have been so bad financially for a long time, my reaction was mostly just to ignore my retirement accounts. In fact, I went over a year without even logging in to check my balances because I was still so disgusted at the amount of money I lost and the bad timing decisions I made.
In retrospect though, I am in a much better position that most because 1) I still have much more than the average person my age saved, and 2) I still have equity in my house.
And in case you’re wondering why its gotten harder to reach your retirement goal, here are some highlights:
The economy has made it harder to reach our retirement goals. There haven’t been a lot of bright spots in the economy since the early 2000’s, but the financial crisis in 2008 has had an extreme effect on people’s retirement accounts. With a bad economy, many have lost jobs. A lost job not only means the lack of saving for retirement, but many had to withdraw what savings they had just to survive. For those with jobs, many were asked to forego raises or to even take pay cuts. All of these effects made it harder to save for retirement.
The stock market has made it harder to retire. The stock market only recently got back to where it was in 1999. And after the 2008 financial crisis, stock returns were miserable. For those with large retirement accounts, many saw close to half of their savings disappear. And since then, the market has come back, but has only gotten to where it used to be. That means that investors have still missed the typical gains that a normal market would have provided. To further the pain, many investors sold stocks when the market was low and have been too scared to get back into the market. Those people have missed out on some pretty spectacular gains and now it is even harder to jump back into a market that has risen so far so fast. In the end, retirement accounts are not doing as well as they would have been, had we not had a rough stock market.
The housing market has made it harder to reach our goals and retire. For many, a home is their main savings account. And when housing prices fell the most since the great depression (not sure if that is actualy correct or not, but I know it was one of the worst downturns) many homeowners were left with mortgages bigger than the value of their house. Add to that all of the ridiculous loans that banks were so easily doling out, and many people that needed to refinance were no longer able to do so. The huge losses in housing prices also greatly affected retirement goals. The reason the baby boomers fared better was because many of them had already paid off their houses, or owed very little. That means they didn’t have to make rash decisions or lose their homes like many others.
We’ve lost a decade of growth. In the end, we lost a decade of growth in stocks, home prices and of course in our retirement accounts. Anytime that happens it’s going to be hard to come back from. For many, that will mean working longer. However, if you stay focused and increase your savings and income rate, you might be able to make up for lost time. And who knows, the way the market looks now, we might be in for a long term bull market that can help us all get back to our goals.
Have you had some struggles with your retirement accounts and goals? Please share by leaving a comment below.