Hello there! I am trying to become financially literate this year. I have listened to a bunch of people refer to the 2008 economic downturn, and how it set back their retirement savings.
I was 8 at the time, so I don’t have much life experience in economic recessions beyond COVID.
I understand that if you have retirement savings (401k or IRA), the money is invested in the stock market. When there is a downturn, those assets are worth less. But retirement accounts are long-term, so wouldn’t the assets just regain their value after an economic recovery? Why would it set you back permanently? Can’t you just wait?
Thank you! 🙌
In: Economics
You have a lot of the right ideas already. What happened in ’08 was people panicked, were worried it was going to keep getting worse or not bounce back, and stopped their losses by getting their money out of the assets that did badly. We now know that if you left your account alone it would have bounced back, but people at the time had doubts and didn’t want to wait it out.
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