From today’s Wall Street Journal:
The idea of saving for retirement always terrified Zack Teibloom. With the stock market’s big drop this year, it seems even more daunting.
“I don’t even have one K, let alone 401 Ks,” says the 23-year-old Mr. Teibloom, a recent college grad who works as an editor for a small magazine in Chicago. “I’m worried that if I put money away, it won’t even be safe the way the markets are going.”
The saving and investing habits of young workers have long been dismal. Only 49% of eligible workers in their 20s participate in 401(k) plans offered through their employers, according to a 2007 study from Hewitt Associates Inc., a Lincolnshire, Ill., consulting firm. And less than 20% of this group is saving anything at all for retirement.
Source: WSJ – Market Turmoil Frightens Off Young Investors ($)
Isn’t it crazy how we do the exact opposite of what we should be doing? If the stock market was going up, up, UP, people would be jumping in left and rightessentially buying over-priced stocks. Now that the market is on a downswing, people are sitting on the sidelines. The very next paragraph of the article even mentions this:
Declining stock prices actually favor young investors, because it means the shares they buy have more room to grow in the decades before they hit retirement. But anecdotal evidence suggests the rocky stock market is scaring off many young people.
1. Remember this quote from Sam Stovall, chief investment strategist at Standard & Poor’s:
“Since 1950 we have had 48 pullbacks – meaning declines of 5 – 10%. We’ve had 18 corrections – meaning 10- 20%, and 8 bear markets. At the worst on average we end up getting back to normal in about 3 1/2 years. But people just don’t want to wait that long and they let fear overtake their emotions.”
2. Take a look at these posts from my archives:
3. Read Jeremy Siegel’s Stocks for the Long Run*.
4. Finally, if you’re young enough, tell yourself this: “I’m young. I have 30 years until retirement. I’m diversified. Why do I care what the market is doing today? The stock funds I’m buying today are on sale and I’m getting a good deal if I keep them for the long-run.”
Sitting on the sidelines isn’t a good option.
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