Good news, retirement savers: the market’s crashing. Finally. Last week, the Dow dropped more than 1,000 points. It did so again yesterday morning, before recovering most of the loss by midday. The financial reporters were chasing their tails faster than ever. “The market is down! What does it mean?!” And then, hours later: “The market is recovering! What does it mean?!”
But counterintuitively, what working Americans saving for retirement really need is a market crash that lasts.
A little behind saving for retirement? You need a grizzly bear market
If you’ve been diligently saving for retirement, say in your 401(k) or IRA, you’ve been buying into a rising market for the past six and half years. And that’s fine, but you could really use a good, solid break in the market. A deep sustained bear market.
That’s when your retirement savings gets turbocharged. You’ll be buying the market at a discount for the first time in years. With each paycheck-deducted contribution into your retirement savings, you’ll be snapping up shares at a faster than ever pace. You deserve more bang for your buck. With a really horrible stock market, you’ll finally be getting caught up a bit with your life-after-work nest egg.
Come on bear market, stay ugly
The thing is, the market just hasn’t committed to being really bad yet. But maybe this is finally our time. We just need it to go down and stay there for a while. Bear markets only last for an average of 14 months – while bull markets stretch on and on; for an average of more than three years (43 months), according to Putnam research.
Imagine if we could buy into a discounted market for a year or two – and then hang onto a raging bull run into retirement!
Don’t just get our hopes up
Maybe we're just being overly optimistic – hoping for a really big, sustained drop in the markets. But if you walk on the sunny side of the street, you might want to crank up those salary deferrals into you 401(k), max out your IRA contributions and put some of that cash to work in your taxable brokerage account.
And then hope for the worst.
This article originally appeared on Main Street.
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