As Americans, we’re accustomed to having options. There’s always another answer, another solution, another way to lick a problem. (Sometimes, though, I think that’s how we got ourselves into the mess we’re in right now. Don’t have the money? Charge it. Can’t afford the bigger house? Leverage yourself beyond sanity.)
But what if you’re retired—not “almost retired” or “newly retired,” but actually well into retirement—and the market downturn has depleted your retirement savings? What are your options?
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Retirement … retirement … retirement. Most of us are painfully aware that the responsibility for providing for ourselves in retirement rests squarely on our own shoulders. If we didn’t fully appreciate this sobering situation before, we certainly do now.
Retirement is very important. But is it the most important reason to save?
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In an earlier post, I asked readers to share techniques that have helped them to save. After all, spending less than you earn is the essential first step in investing. Vanguard shareholders tend to be people who’ve long made thrift a habit. And it’s a habit many folks, confronted with today’s tougher economic and market climate, are trying to pick up.
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Every year, I look forward to newspapers’ “what’s in/what’s out” lists.
High up on the financial “what’s out” list in 2009 is “leverage”—borrowing money to make a bigger bet, whether on housing, commodities, currencies, collateralized debt obligations, or corporate buyouts.
And the “what’s in” list has to have a home for thrift. The notion of saving for a rainy day tends to come back in fashion whenever we’ve been through the kind of economic downpour that has hit investors in 2008.
After a drop of 40% in the stock market, even disciplined savers and investors may have to ratchet up savings to restore our portfolios. Among those who had been saving only a bit—and national statistics indicate that’s a very large percentage of households—the need for a return to thrift is even greater.
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