Has your retirement account taken a hit like mine?
October 8, 2011 5:27 PM   Subscribe

I just checked my retirement account. Last year, I lost about 7% of the total after ten years of contributions. Is this happening to everybody?

I am not ranty, I'm not looking for a pity party. I just want to know what other people's experiences have been and what they're doing about it, what kind of attitude they have taken. I'm American, 48, male, with a government job that isn't going anywhere anytime soon. There's social security and another government fund available when I retire, so I'm not panicking, just curious. Tell me what's going on with you if you're in this situation. Thanks.
posted by flowerofhighrank to Work & Money (20 answers total) 2 users marked this as a favorite
We can't answer this question without knowing what you're investing in.

I mean, I look at my account and I've gained money over the past decade. Everyone's retirement accounts hold different stocks, bonds, etc.
posted by dfriedman at 5:31 PM on October 8, 2011

Like your account decreased 7% last year? Or the return is -7% over ten years?
posted by JPD at 5:32 PM on October 8, 2011

I lost 10% in the past quarter. Europe is having a rough time paying bills, and Republicans continually act like children with the US economy. It's just a volatile time to invest, but I can't get out without losing 33% to the IRS, so I keep putting money in every couple weeks. So it goes.
posted by Blazecock Pileon at 5:37 PM on October 8, 2011 [6 favorites]

There are plenty of people who have had -7% returns (or worse) in recent years. The big mistake people make (unless you're really close to retirement) is looking at those negative returns and thinking, "Oh God, I need to get out of these risky investments!"

If you shift your investments into conservative funds when the market is low, then it's going to take a lot longer to crawl back into the black when market performance improves. In essence, you'd be buying high and selling low.

You can thank hedge fund managers, commodity traders, and other Wall Street bankers for recent market volatility. They say they "efficiently distribute capital across diverse markets." I say they feed and profit from fear.
posted by GnomeChompsky at 5:38 PM on October 8, 2011 [7 favorites]

I'm down about 8% over the past 3 months.

Just keep contributing...
posted by shew at 5:41 PM on October 8, 2011 [2 favorites]

Some of my funds are down, some are up. I think my Target 2050 fund is doing the best, and it was either small firms or international doing the worst, on my last statement. Overall for the last year I'm just barely above 3% up.

This is why I have automatic rebalancing set up on a quarterly basis.
posted by SMPA at 5:50 PM on October 8, 2011 [1 favorite]

Unless you are retiring in short order, which I am not, I like to think of it as I have had my buying power increased.
posted by Nanukthedog at 6:05 PM on October 8, 2011 [4 favorites]

This is a couple years old and it is the S&P which is neither "the market" nor your retirement account, but all in all it has been a pretty lousy decade in the market.

My attitude (I am 8 years younger than you) is that I will take a chance on the market which, based on its couple hundred years of history, looks reasonable (there are those who dispute this based on their view on how, in a nutshell, human society is doing. I don't discount these attitudes but I'm not going to turn to guns and gold or anything).

Value isn't anything, some would argue that in retirement investments it isn't anything until it's actually time to cash out (obviously this isn't absolute, see retirement plans, Enron employees). As Nanukthedog points out your investment during low periods buys more stocks because their prices are low. I never look at the value of the accounts, what's the point.

Which is not to say ignore your retirement account. This is the kind of thing SMPA mentions above, incidentally, and it is certainly worthwhile to understand how your retirement savings are invested and what tools might be at your disposal to attain your retirement goals.
posted by nanojath at 6:16 PM on October 8, 2011 [1 favorite]

The key is asset allocation. You need to make sure you're comfortable with what you're in and that it is suited well to your other savings, retirement objectives etc. Stocks have not had the best 10-12 years, and if you have been solely in a US stock index fund your returns are not likely much to write home about. At your age, even with your job security, you want to probably have a decent slug in a diversified bond fund, a smaller slice in REITs and you may want to consider some kind of commodity or "market neutral" strategy too, for diversification. You also need to make sure you have adequate global exposure and that the funds you own are pursuing different strategies, with different portfolios. You want to have a mix of funds that do different things from one another and therefore lessen your chance of your portfolio getting hammered by a single market event. It's very difficult to gain back steep losses, so that is what you want to avoid. Having an intelligently diversified portfolio, along with re-balancing to avoid emotional knee-jerk type decisions, as SMPA mentioned, are the two keys to doing well over time, even in a sideways to down market as we are in now. And of course the most important thing, as others have said, is to regularly contribute.
posted by the foreground at 6:19 PM on October 8, 2011 [4 favorites]

Yes, I've had investments that have lost value in the past year. The way I looked at it was, if I still thought they were sound investments, and the price per share is now much less, I did my best to plow more money into them whenever I heard there was a big drop in the market. My attitude: sold a bargain! I prefer to try to invest during the down times in a given year instead of strictly dollar cost averaging, but I think dollar cost averaging is a good approach too.

The shares I already own that had a lower value at that time due to market fluctuation are long term investments, so it really doesn't emotionally impact me if they lose 10% or 20% of their value on paper - what matters is what their value is when I sell them, 30 or more years from now.
posted by treehorn+bunny at 6:27 PM on October 8, 2011

I just read this article in The Independent about how UK Pension funds have "lost 30% of their value in the last 3 years". Grim.
posted by dirm at 7:31 PM on October 8, 2011 [1 favorite]

Last year, I lost about 7% of the total after ten years of contributions.

It's not clear what you mean here. Do you mean that at the start of last year you had $10,000 and at the end of last year you had $9,300? Or do you mean that you put in $1,000/year for ten years and you now have $9,300?

The former is obviously disappointing but not that uncommon. The latter is less common and even more disappointing!

If it's any solace, the S&P 500 --- which is a broad measure of large US stocks --- is pretty close to flat over the last decade. So you're not alone.
posted by alms at 7:50 PM on October 8, 2011

Mod note: on-topic please? thanks.
posted by jessamyn (staff) at 7:55 PM on October 8, 2011

My 401k is only holding steady due to contributions; it's down 13% for the year. For a couple of years previously, though, it was up just a stupid number, like 40% per annum before contributions, and I was frugal and lucky enough to be able to make large contributions. Barring anything catastrophic, I'll probably be okay when I'm 70, in 38 years.
posted by infinitewindow at 9:16 PM on October 8, 2011 [1 favorite]

My 401k is down 8% for the year and I have pretty conservative investment choices. I think most people are in the same boat.
posted by meepmeow at 10:37 PM on October 8, 2011 [1 favorite]

Response by poster: OP here. Thanks to all for being so polite and helpful. You are all great!
posted by flowerofhighrank at 11:24 PM on October 8, 2011

Yes, this is happening for everyone, but depending on the exact time period you've lost 8% in you may be doing worse than some.

For a quick comparison check Vanguard mutual fund performance. Tick the "Balanced" checkbox in Asset Class to narrow the list down to funds that are roughly like what a typical retirement account should be. There's a variety of relevant funds there; I'd look at Target Retirement 2030 and Balanced Index first.

The Vanguard Target Retirement 2030 fund is roughly -7% since Jan 1, -1% for the last 12 months, and just about 0% for the last 5 years. It's important to compare for exact time periods. If you lost 8% since Jan 1 you're roughly matching that fund. If you lost 8% in the last 12 months, you probably missed out on the massive stock runup last fall.

Of course there are a zillion other investment strategies; the Vanguard funds are relatively simple and ordinary and make a good basis for comparison. In general they've returned +5% to +6% annually over a 10 year period. If you invested $100,000 for 10 years at 5%, you'd have about $160,000 today.
posted by Nelson at 6:54 AM on October 9, 2011

I think there are two things to check, one is how well the fund you are in compares to other funds available, I've done that in the past at either google finance or yahoo finance. Two, check how much they charge you each year to invest your money.

Me? I've run my own IRA through e-trade, which charges more than I like, so I trade as infrequently as possible, my returns have been good because, as my girlfriend says, I am the luckiest guy out there.
posted by rakish_yet_centered at 7:41 AM on October 9, 2011

Please remember this as well: when you see a dollar amount on your statement, those aren't actual dollars like a savings account. That is simply the market value of the stuff you hold on the day the statement was printed. You aren't losing money unless/until you sell the stuff you own for less than what you paid for it.

As for performance, do you mean that you lost 7% for 1/1/2010 - 12/31/2010? Or that you lost 7% in the last 12 months? If it is the former, that's not a great return. If it is the latter, that's about right.
posted by gjc at 7:54 AM on October 9, 2011

Since 1999 my retirement fund has taken four large hits. Dot Com bubble, 9/11, housing bubble, and Euro Zone crisis. Every time I get back to even I get knocked down again and I am as well distributed as one can be. Over the 12 years I am probably even outside of ongoing contributions. I could consider adding to my investments but given their performance I don't see things improving in my lifetime. I may have been better off with a money market account.
posted by Xurando at 1:58 PM on October 9, 2011

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