Retirement Planning: Dealing with Statement Shock in These Economic Times
As I perused the latest quarterly statement from my Roth IRA account, I had to fight feelings of statement shock. Sure, I knew what was coming (who wouldn’t know, after all the Wall Street drama lately), but that didn’t really prepare me to see the numbers staring me in the face.
Investopedia defines statement shock thus:
The shock associated with opening an investment statement and seeing that the value of your portfolio has dropped more than what was expected. Statement shock is most commonly referring to an unexpected drop in value but can also be used to describe lower than expected returns.
And really, that was my experience (the first part). I had vague expectations of what I would see, but I wasn’t truly prepared. But then my normally long-term outlook asserted itself, and I began thinking about the positives. After all, now is not the time to panic.
Some people have expressed worry, threatening to liquidate retirement accounts and considering all sorts of rash actions. While it is certainly time to cut your losses on some investments, there are those that actually represent a bargain. You can buy at a low prices — getting more for your money — and then when the market recovers, you will be sitting pretty.
The trick, of course, is to make good decisions. You need to choose solid investments that are likely to recover. Another trick is to keep the long term in mind. While statement shock can be initially disconcerting, it is important to take a deep breath and remember that over time the market gains. So, if you plan to retire in more than 10 or 15 years, you are probably going to be okay.
If you plan to retire sooner, it might be a good idea to consider other options before you begin withdrawals. Cash, working past your target retirement age, a reverse mortgage and other options can get you through until the market recovers and you can take retirement plan withdrawals without decimating your principal.
September 26th, 2008 at 10:53 am
[…] if Wall Street investment banks fail, one by one? I’m not so sure that it will. Yes, the statement shock for regular folks with retirement plans will be there. And things could get dicey for a while. But […]