Are you freaked out about your retirement accounts getting pummeled so far this year? You're not alone. Retirement assets are estimated to have plunged by an astounding and painful $8.77 trillion going into Tuesday. That puts a big dent into your retirement planning.
The $8.77 trillion setback is calculated using numbers from the Investment Company Institute (ICI) through March 31, plus forward projections based on market performance.
Retirement accounts alone, such as IRAs, 401(k)s and 401(k)-like plans, have nose-dived an estimated $5.69 trillion this year. Those are part of retirement assets.
To put $8.77 trillion into perspective, consider that Fidelity Investments had $11.3 trillion in assets under administration as of March 31. That included $4.3 trillion in Fidelity investment products such as its mutual funds and managed accounts.
More perspective: the Apollo moon-landing program cost $280 billion from 1960 through 1973 in inflation-adjusted 2020 dollars, according to planetary.org. This year's bear market has wiped out more than 32-fold more money.
Retirement Planning
In addition to those IRAs, 401(k)s and similar plans, other retirement assets in the ICI's tally include annuity reserves as well as private- and public-sector pension plans.
Retirement assets reached a peak value on a quarterly basis of $39.3 trillion as of Dec. 31.
Retirement assets fell by $1.8 trillion in the first quarter. In that quarter, the broad market in the form of the S&P 500 dropped 4.6%.
Decline In Retirement Assets
Retirement assets began the second quarter valued at $37.5 trillion. Further frustrating retirement planning, the S&P 500 has nose-dived another 18.59% in the second quarter so far. That brings retirement assets down roughly to an estimated $30.53 trillion year to date.
IRAs and 401(k)-type accounts fell an actual $1.3 trillion in the first quarter. That 5.2% decline is more than the market fell, despite the ongoing infusion of retirement account contributions.
One key reason? The "Great Resignation." A strong economy gave multitudes of workers the moxie to quit jobs and take new ones. But their retirement accounts in their new work places started out with zero balances, dragging down the average, says Fidelity retirement planning expert Mike Shamrell.
In any case, if IRAs and 401(k)-type accounts fell only as much as the market so far in the second quarter, they'd be down another $4.39 trillion to a total of $19.21 trillion.
That would be a year-to-date downturn of $5.69 trillion.
History Of Bear Markets
Is there any good news? If there is, it's in the history of bear markets.
The market is now down 22.33% for the year. Research by Sam Stovall, chief investment strategist for CFRA Research, shows that the average bear market since 1946, after World War II, through June 16 results in a 32.1% decline.
If you're looking for retirement planning consolation, the Stovall numbers suggest we're 70% of the way to the bottom, based on the current average.
Retirement Planning: Wait Until April?
Still, the average "garden variety" bear market — a decline of 20% to 40% — lasts 313 days. That's roughly 10 and a half months.
On that time scale, if this turns out to be a "garden variety" bear market, we won't be out of the woods until about next April.
That's the size bear market that Stovall expects. "I think we're in a garden variety bear market, based on technical targets and fundamental forecasts. I see it declining between 27% and 33%."
Fidelity's Shamrell urges workers to think long-term with their retirement planning. He discourages workers from cashing out from the stock and bond funds that their long-term investment plan calls for. "Many studies show that market recoveries often start abruptly," he said. "If you're in cash, you miss out on that initial jump."
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about retirement planning and actively run portfolios that consistently outperform and rank among the best mutual funds.
