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
Some of it is people misunderstanding…
There was a time when the recession caused the stock market to fall about 50% from it’s highs and that can be scary to see. Some people did panic sell and realized big losses. But if those people didn’t panic sell, and kept their 401k contributions in place, they actually probably came out better in the long run. Their holdings that lost value eventually bounced back, and any investment money invested at the bottom saw substantial gains.
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