During the 4th Quarter of 2018 and the first week of 2019, people were panicking about the market. The S&P dropped to 2,346.58 the day before Christmas (closing at 2,351.10), 20.06% off the recent high and officially falling into a bear market.
How did you react? Were you panicking?
Personally, I was bummed that the decline meant I wouldn’t end the year above $150,000 in retirement accounts. (As of my last update, I ended the year at $143,693.25.) And this was also the first time that I had money to “lose”. I didn’t let that stop me from putting some birthday money into VTI. Between my birthday money and the regular weekly contributions that had been adding up, we were able to buy 5 shares of VTI. Since the December 24th lows, VTI has gained 11% (not bad!). Of course, those gains could reverse. But, if they do, we’ll be cutting our expenses to buy some more. (During the recent downturn I also turned up my 401k weekly contributions 2%)
Don’t Be Worried
It’s important to remember that when you ran those calculators to come up with your “magic number” you needed to save, and the amount you needed to save by a specific date, downturns were automatically factored in (our plan is here). They are already embedded in your plans so you don’t need to sell your stocks and buy bonds or move everything to gold. Trust that beautiful brain of yours that designed your plan in the first place.
Think of your favorite index fund (VTSAX, VTI) the same way that you think about anything else that you buy regularly. You love to see those things you were going to buy anyway, go on sale. A decline in the stock market is just that, your favorite stocks are on sale. It doesn’t feel good to buy while everyone around you is telling you to “run for the hills” and that “the stock market is doomed.” But keep buying, don’t change your strategy.
You Got This
Your retirement plan is solid (because you modeled it using the SMARTER goal strategy). You calculated your expected net worth at the time of retirement using a calculator and a moderate estimate of a 7% return. Just keep plugging along, it will all work out in the end.
4,188 days remain on our journey to $1,000,000. There will be many tough times watching our retirement accounts slide and “lose money”. But, I know our plan is strong and time (for now) is on our side.