In 2008, everyone’s retirement plans and 401ks took such a hit that it changed the way we invest forever. No one wants to be caught with his or her pants down and lose money like they did in just a few days in 2008. The first change is the amount of pessimism in investors.
Fidelity Investments and GfK’s online survey of 1,154 investors found that 47% of those polled lost a significant amount during the financial crisis – averaging a 35% loss. 17% had lost jobs, and 35% lost wages. Almost 20% didn’t think the recession is over. The second investment strategy change is the amount of responsibility we take in preparation for our retirement. Pension or defined benefit plans are in decline and investors have recognized that they, alone, are responsible for saving for their retirement. The days of relying on your employer or the government is over. Survey respondents said that they believed the government; employers and financial services companies only have “some” responsibility or none at all.
The third change is how much we save. Paying down debt and creating an emergency fund can both free up your IRA or 401k from unexpected crisis. Paying down your debt frees up extra money to put into your retirement plan and the emergency fund helps save you from dipping into your account for other needs. Increasing contributions help investors feel more prepared for another financial crisis. 42% of those surveyed increased their contributions to their employer plans, IRAs, and HSAs and more than half of them said they actually feel better prepared for doing so.