30 • MARTIN H. RUBY
which the health of the overall stock market is often measured, fell by nearly 40 percent. ⁶ My friends who were thinking of retiring around the year 2000 truly understand the concept of “market risk.” In January they thought they had $1 million to retire on, and by December their accounts were depleted. A few bad years in the market had wiped out what it had taken them years to save. The hit was so bad, a common joke was that 401(k)s had become 201(k)s. But there’s more to market risk than how much is in your ac- count when you go to retire. A bad market crash can hurt, but so can years of underperformance in the market. The truth is, almost all of our retirement security is in some way tied to market performance. 401(k)s and IRAs are extremely susceptible to market swings, particularly for younger savers, who are encouraged to put more of their money into funds exposed to the stock market. That introduces a huge level of uncertainty into our best-laid savings plans. The Worst Decade in Market History Imagine you had to save during the worst decade in modern U.S. market history. A market so bad, you would, on average, lose money every year. A market that saw not just one, but two crashes that wiped out more than a third of your savings’ value. We feel for our parents and grandparents who had to live through the Great Depression. But here’s a surprise: their genera- tion isn’t the only one that grew up during one of the worst mar- kets in history. Yours did, too. Years 2000 through 2009 are estimated to be the single worst decade for the S&P 500®. You might have heard it called the “lost decade of investing,” because the market ended the decade pretty much at the same point it started.
⁶ Andrew Beattie. Investopedia. January 2, 2022.“Market Crashes: The Dotcom Crash.” http://www.investopedia.com/features/crashes/crashes8.asp.
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