How has the Stock Market Affected Your Generation?

Posted on Aug 24, 2011 by  in 401(k) Retirement Planning, Retirement Life, Retirement Readiness

While the stock market continues to bounce back and forth, it has become obvious that this extreme ebb and flow affects each person and their family in one way or another. Investments and retirement plans are taking a hit, but how does a person’s age change his or her viewpoint on the situation? We spoke to several members of different ages to listen to their generational perspectives on the recent roller coaster ride on Wall Street.

One 64-year-old baby boomer feels that due to the current economic downturn, common sense isn’t common anymore. He did not start saving sufficiently until his 40’s, and got a late start because he planned on getting a pension plan. Little did he know at the time that his pension plan was not a reliable one.

“Once 401(k) came along, I saw it as a great opportunity,” he said. “My intent is to work longer to make up for more assets. Statistically, this is common. Does it make me nervous? Yes. Will I make any drastic changes? No. I’m confident that the market will come back at some point and I will have time to ride it out.”

This boomer admitted that if he needed those funds within the next year or two, he would worry more. While catch-up 401(k) is available for those over 50, it is only an option if you are financially able to do it. “Put away as much as you can,” he said. “Sometimes you have to put away money until it hurts.”

A second baby boomer, who is 61 years old, looks at the fluctuation as an opportunity to buy cheap investments because he is still thinking with a long-term mindset. He knows that his saving will not end in just a few years. He has no plan to take all of his investments out at one time once he retires – it will only be in small increments. “Living frugally makes a big difference,” he said. “Since I haven’t lived beyond my means, I feel more comfortable about the future. Retirement is something that everyone has to deal with at some point. Understanding that has enabled me to save sufficiently.”

Next we spoke to two members of Generation X (those born between 1965-1980), one is 40 years old and the other 35, and they have similar views on today’s stock market. Both see the drop of stock prices as an opportunity to purchase cheaper stocks and are not as worried about its long-term effects. Realistically, these individuals will probably see more short-term effects than long-term, such as current interest rates, prices of gas, food and other everyday items. They agree that it is important to pay close attention to the stock market because they still have a lot of saving left to do.

“This is not the end of investing by any means,” said one of the Gen X members, who is 40 years of age. “It has little to no bearing on what my ultimate retirement benefit will be. I look at it as an opportunity to gain more down the road than to lose.”

The two agreed that their 401(k) accounts were far more practical than simply using a savings account, which can be tempting for some to withdraw money at any point. With the 401(k), money is only being deposited and is meant to be untouched until retirement. It is like a cookie jar being wide open, versus having a lock on it.

Finally we spoke with a 30-year-old Generation Y member (born between 1981-1999), also known as a “Millenial.” He feels that with pensions and social security starting to break down, a new model of funding retirement is now coming into place. “I think that my generation realizes that social security will not be around by the time I retire,” he said. “I know I need to fund my own retirement and will not plan to receive anything else from the government.”

After gaining some perspective from each individual, one message became very clear; don’t get caught up in the drama of today’s market. Remember the reason why you are saving is to be retirement ready.

How has your age affected your view on the stock market and retirement savings?

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