Conscientious Financial Planning and Retirement Income Management | 201-741-9528
from Lonier Financial Advisory LLC, Osprey, FL

Retirement Fund Recovery

Retirement Fund Recovery

The Urban Institute, which hosts a site dedicated to non-partisan retirement policy research, posted a year-end update of retirement account balances. Total retirement account balances fell about 31% or $2.7 trillion in Q1 2009, the market bottom of the recent financial crisis, from the pre-cash peak total in Q3 2008 of $8.7 trillion.

The good news is that retirement accumulation has mostly rebounded from the crash, and at year end was calculated at $8.6 trillion. This represents a bounce of about $400 billion in Q4, from the lower total of $8.2 trillion during the Q3 correction, though still short of the $8.9 trillion peak in Q1-Q2 of 2011.

[imageeffect type=”frame” width=”500″ height=”271″ alt=”” url=”/wp-content/uploads/2012/01/RetirementAcctBalances.gif” ]
from www.urban.org

The market has moved steadily upward since mid-December. The S&P 500 is up almost 4.6% in the 13 trading days since January 1, just 3.5% off its April 29 high last year, so account balances, for those who hold equities, have improved even more this month.

The S&P fell almost 57% to its bottom in 2009. The 31% drawdown in retirement accounts surely shows the wisdom of strategic asset allocation including holding a significant percentage of risk-off assets, which cut the drawdown almost in half. And the rebound, in the 34 and half months since also shows the virtue of staying invested even in a deep crisis. If you had sold out near the bottom, perhaps fearing even further decline, and didn’t buy back in until early last year or maybe even back in April of 2010, your holdings might just beginning to move off of market bottom value.

For those fast approaching and just beginning retirement, if not for everyone, the message should be clear—it’s time to get strategic!

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