Commentators almost seem to have been competing to coin the catchiest—or most negative—label for the ten years from the end of 1999 to the end of 2009. It’s not surprising that some have called it the “Decade from Hell,” given the 9/11 attacks, wars in Iraq and Afghanistan, Hurricane Katrina, a deadly tsunami, the nastiness of domestic political discourse, soaring unemployment and federal budget deficits, etc.
Like everyone else, I’ve been reading (well, skimming) reams of year-end—and in some places, “decade-end”—economic summaries. There’s lots of talk about black swans, financial “Frankensteins,” lost decades, and fundamental changes in investor behavior.
Black swans are old news, and I’ve written on financial innovation and lost decades previously. And I’ve only got a tiny bit to say about investor behavior. I’ll get to that after sharing a few other observations I wish got more attention in all this year-in-reviewing.
I elicited some grief from certain Vanguard Blog readers by talking about a recovery in 401(k) accounts earlier this year. Allow me to provide an update on the issue.
Recall my basic premise: As a result of ongoing contributions, as well as portfolio diversification, the wealth level of many 401(k) participants had not fallen as dramatically as commonly perceived. In fact, some workers had experienced growing 401(k) account balances even during falling markets. These were, admittedly, mostly employees starting out their savings careers, where contributions are large relative to balances.
I realize this will be about my third post on this issue, but the things people are writing about 401(k)s just get more and more absurd, and it’s tough to sit by and let this go unchallenged.
Now the editors of The New York Times are claiming that “Even with recent stock market upswings, account balances are roughly 25 percent lower than before the crash.”
Each year in August we publish a compendium of statistics about 401(k) plans administered at Vanguard. As the report covers over 3 million American participants, it often generates a lot of interest from the media, policymakers, consultants, and employers. (You’re certainly welcome to read the entire book—please do!—but for the CliffsNotes version, just take a look at the executive summary.)
