Why The Bear Market Is Good For My Retirement Account
January 30, 2008 by Miranda Marquit
Filed under Finance
My Roth IRA lost in value last year. A great deal of it happened in November. I’m sure it was rather rocky last week as well. But I didn’t check. Mainly because I’m not terribly worried about what this bear market is going to do to my retirement portfolio. If were retiring next year, I’d be terrified. I’d make a plan to keep working a little longer until the market recovers (which it almost always does in the long run). But I am decades from retirement, so the bear market isn’t a bad thing for me.
CNN Money points this out about a long-term investing strategy:
Professionals who have to try to beat the market on a quarterly basis face daunting challenges. But investors with a time horizon of a decade or longer just need to make sure that they are not diverted from a sensible investing plan.
I’m not a professional. I’m a regular gal whose investing plan is almost entirely based on dollar cost averaging. My returns may not be “sexy,” but when the down cycle is over they’ll be back to beating inflation, and during this bear market, my Roth IRA will have bought more shares. I’ll have more shares when the prices recover, and that means I’ll have more in my retirement account.
“If were retiring next year, I’d be terrified. I’d make a plan to keep working a little longer until the market recovers (which it almost always does in the long run).”
Well that’s not comforting; I’m retiring in 5 weeks! But I’m not terrified because I know (like you do) the market recovers over the long run, and I have stockpiled my first 3 years of living expenses into cash in anticipation of retirement (and the potential for a turbulent market over the first few years). The market’s free falls are only a problem if you are forced to sell while it’s down–hopefully that won’t be the case for me!
Good call RetiredSyd! Pulling it out ahead of this mess was a good plan. You have the time to wait for the market to turn around. Always plan for the unexpected!