Fearing Fear Itself

SEEING YOUR IRA or 401(k) decline precipitously is bad enough. Locking in those losses is far worse. The good news: I’ve perused various Facebook retirement groups since the Russian invasion of Ukraine and have seen few signs of panic.

For instance, here’s some good advice from a prudent retiree: “Stay the course, but in the future make sure you have enough in a cash reserve for at least one year of planned withdrawals or RMDs,” meaning those pesky required minimum distributions that must be taken each year by those of us age 72 and older.

Make no mistake: Once you’re retired, your perspective changes, as the reality of risk becomes more apparent. Consider this comment from a recent retiree: “Everyone says hold and the market will bounce back. That is what I have always done, but it is a bit more scary when you are no longer earning.”

Those sentiments were echoed by another recent retiree: “The market tanked just as I was about to withdraw funds for our first couple of years. We’re using a cash cushion for now, but will eventually have to start withdrawing, despite current market conditions. I’ve never worried about market swings in the past. I’ve known time was on our side. But now the time has come and I hate starting out [retirement] in a down market.”

At some point, time does indeed run out. That’s why a more conservative investment mix goes with aging. One retiree expressed this concern: “I wasn’t worried about market dips, there is always time to recover. But now, 10 years into retirement, there isn’t that much time.”

No doubt the Facebook comments would have been more panicky if stocks hadn’t quickly recovered from Thursday’s initial sharp market decline. Still, many folks have seen their portfolio take a beating in 2022. It isn’t easy watching your investments decline, especially if they represent your life’s savings and the money you’ll live on in the years ahead.

My Fidelity Investments’ account, which I foolishly look at every few hours, is down more than $200,000 since December. “Stop looking,” I tell myself.  What I won’t do is move out of stocks. In fact, in recent days, I convinced myself to buy more of a large-cap index fund. I also bought more of my former employer’s stock, which has taken quite a dip.

Back in 2008, when I was working in employee benefits, I tried to encourage the company’s workers to leave their 401(k) alone and keep investing in stock index funds. In most cases, my pleas fell on deaf ears. I hope you won’t be among those who, in 2035, talk about losing their retirement funds in the market crash of 2022.