The stock market turmoil of the past few years has spooked many of you looking to invest and save for retirement.
But it’s time to get unspooked, advised David Bach, personal finance expert and author of numerous money management books, during a live web chat Wednesday where he took readers questions about retirement planning.
He had a spirited exchange with one reader who saw little value in stock market investing at this point, and had little confidence in financial planners or the U.S. economy.
What if the stock market just goes side ways for the next twenty to thirty years and compound interest ends? Have fun saving for retirement then. All of these models financial planners have blow up. And the reality of it is most American will be totally screwed. Then what?
The reality is, Jeff, that the plans haven't totally blown up. In fact, according studies, people that have stayed the course since the stock market crashed after the recession are now UP, and have seen their 401(k) accounts go from the mid $40,000 levels to the mid $70,000 levels. The Dow Jones Industrial Average is up over 100 percent in the last four years from the bottom. We've just lived through one of the fastest stock market corrections in our lifetime. The bond market continues its historic bull market, and has produced annual returns of double-digit proportions. Municipal bonds last year were up over 15 percent. So, good financial planning and consistent savings have helped Americans survive and prosper through this recession. If you believe the stock market is going to stay flat for thirty years, then you should be focusing all of your savings on paying down your debt (specifically your mortgage).
And Jeff countered:
Over the last ten years the market has been side ways. Yes, pick the low point to the current run up to distort reality. Look at Japan. That could well be the future of the U.S. Good luck saving enough for retirement with out compounding.
To that, Bach added:
People save weekly and monthly and quarterly and annually. You my friend are the one distorting the facts. People didn't pile into the stock market ten years ago and then never add to their retirement accounts. And bonds have done extremely well. So has gold, silver and on and on. People are making money investing. If you don't believe it to be true, then don't invest. You can simply spend everything you make, live paycheck to paycheck and then get on live chats like this one and just complain the world is always going to be a terrible place. Sounds like a tough way to live however. I would rather bet on myself to win and bet on America.
Bach’s frank money advice touched upon everything from when to start taking disbursements from retirement plans, to whether you should raid your retirement fund to pay for your kid’s education.
Here’s a transcript of the web chat: