Implications of a Bear Market for Retirement Security

Sponsored By Vanguard

Topics:

Employee Benefits & Human Capital > 401(k) , Defined Benefit

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Abstract:

This paper examines several hypothetical scenarios over the past 138 years in which investors would have faced historically similar poor markets. We show the impact of a significant market decline on a retiree who followed a "life-cycle" approach to investingıthat is, moving from an initially high allocation to equities to less-volatile fixed income investments over time. To be sure, whether such an investor retired in 1928, 1972, or 1999 in the United States, or in 1989 in Japan, portfolio balances would have declined as a result of the major downturns during those times. However, we also show that if investors focus on areas that they can controlısaving rates, spending, asset allocation, costs, and (limiting) markettimingıthey can measurably improve their long-term prospects for weathering such negative environments, even those investors who are already retired.

DETAILS

Sponsored by: Vanguard

Released: April 28, 2009

Length: 12 pages

Format: PDF (240 kb)

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