One of my co-workers that I respect a lot depends on Nick Wolfe, CFP, Adams Wealth Management, to manage his retirement account.
He encouraged me to contact Nick's office, and make an appointment.
Yesterday, we met for an hour. We talked about retirement, things we can control, and things we can't.
My brain processes by writing things down. What follows is my way of digesting some of what Nick and I discussed.
We talked alot about risk.
I think how we deal with bad days in the stock market can either ensure, or derail retirement goals.
Being a baseball guy, I think a market loss and setback is kind of like a bean ball to the ribs... it's gonna hurt, but it's part of the game. Take your ball and bat and go home? Or stay with it, and finish what you started?
Below are four times that we have taken one in the ribs on our retirement account...
1. Marlboro Friday. April 2, 1993.
Retirement account loss = about thirty percent.
Time to recover = about two years
At this time, I'd been an employee of Kraft Foods, for six years. A year after I started, in 1988, we got bought by Phillip Morris, for 13.1 billion dollars.
As part of Phillip Morris, our stock options, and retirement accounts were joined at the hip to the giant cigarrette maker.
Later known as Marlboro Friday, this was the first bean ball to hit our retirement account. Phillip Morris announced a 20% price drop on the price of cigarrettes, and the market responded. Investors and fund managers sold name branded consumer goods companies.
A good Investopedia article on that day, some of the reasons, and the recovery.
https://www.investopedia.com/terms/m/marlborofriday.asp
2. 9-11-2001 Terrorist Attacks
Retirement account loss = about twenty percent
Time to recover = about one year
Our country became vulnerable. The stock market was closed for a week. The longest since the Great Depression in 1929. People that hate the USA enough to die to destroy us were here. We lost our innocence, and our trust for each other.
The financial recovery took about a year, but the damage was done. The "Global War on Terror" would follow. The costs of the attack, and the war that followed would be many thousands of lives, and many billions of dollars.
3. 2008 Financial Crisis, aka - The Great Recession
Retirement account loss = about fifty percent
Time to recover = four years
The 1990's and early 2000's. Debt and excess. Everybody wanted some of the pie. Banks were pressured by the Federal government to relax lending requirements. They loaned a lot of money to people that couldn't pay. Some blame government interference. Others say the government should have done more.
George "Dubya" Bush let things get out of hand in 2007. Then, the Great Recession happenned on Barak Obama's watch, and he didn't, or couldn't stop it. Home mortgages were upside down. Loans defaulted. Something had to give. Big banks failed. A few were bailed out by the government.
Another Investopedia article explains some of this...
https://www.investopedia.com/terms/g/great-recession.asp
4. 2020 Covid Pandemic
Retirement account loss = about 40 percent
Time to recover = five months
Shutdowns. Stay at home orders. Masks. We lost our freedom. We also lost more than a million vulnerable Americans to this terrible virus.
Government stimulus checks. The March drop in stocks corrected by September. The way we move and shop changed. Amazon, Door Dash, and similar companies thrived. People that could, worked from home. Lots of people got lazy and stopped going to the store, and restaurants.
One more investopedia article...
https://www.investopedia.com/investing-lessons-learned-from-the-pandemic-5200463
One event I didn't list, happenned at the beginning of my working life...
Black Monday. October 19, 1987.
Retirement account loss = about 35 percent
Time to recover = two years
The 80's got a brake check.
I had been at my first real job at Kraft Foods for six months. This is when I started a 401k retirement account. If anything, we benefitted from Black Monday, and the two year recovery. We had no account balance to lose, and began our buying journey at a 35 percent discount.
Investopedia article about Black Monday...
https://www.investopedia.com/ask/answers/042115/what-caused-black-monday-stock-market-crash-1987.asp
I remembered three of the big four events above. Nick remended me of 2008. I thought it might be interesting to research some details and put it here to come back to later. Especially when the daily, weekly, even monthly market summary is shaky.
It's important to note that all of the above were followed by recoveries, and more gains in the stock market.
Still, markets react to cause and effect, and sometimes no cause. Also, it shows how non-linear the growth is.
Anybody remember 2022? At year end, we were down 19%. Possible causes?? Good ole boring high inflation, rising interest rates, (from the Fed) and a tighter monetary policy. Also, on February 24, 2022, Russia started a war, because they decided they wanted part of Ukraine, for old times sake.
No matter what levers Joe Biden's team pulled, or didn't pull, uncertainty in the financial markets remained.
2022 is a good reminder that the rule of 72 is math, not necessarily a straight growth line. https://www.investopedia.com/terms/r/ruleof72.asp
With that level of risk, why play the game?
Because it's the best game going.
For most of us, mutual funds made up of hundreds or thousands of stocks is the best chance to retire with some dignity. It takes time, dollar cost averaging, and sticking to a plan.
https://www.investopedia.com/terms/d/dollarcostaveraging.asp
Will you take a bean ball to the Financial ribs?
Eventually.
Will you recover from it?
Yes, If... You keep investing and stay in the game.
When is the next bean ball coming?
No one knows.
Nick asked lots of questions, and presented different scenarios of retirement income and expenses.
He encouraged me to stop him and ask questions. And he didn't mind if I ask him to clarify, or go over something again.
Our time went by quickly.
I left the meeting...
Encouraged that we have done some right things so far to get us to this point.
Challenged to make small changes, and keep investing.
Motivated to keep learning and take some of the mystery out of what is next for us.
Excited about the future, and the possibility of working with, and trusting a professional on something this important.
It was well worth my time and effort to meet with Nick Wolf.
You should consider doing the same.
Nick's bio and contact information -
https://davidadamsfinancialplanning.com/team/nick-wolf/
A link to make an appointment -
https://davidadamsfinancialplanning.com/make-an-appointment/
Whether you skipped to the end or read every word, it's ok. The white board in my head that was full and messy, is mostly empty now. That was my goal. Now, I can come here and pick it back up.
You're invited back too. Stay as long as you wish.