Perhaps not surprisingly, nearly 61% of this week’s respondents said that the last three years had impacted their retirement savings “a great deal.”   Losses of 40%, 50%, and more were reported – and even in situations that employed some fairly generous accounting assumptions, including the reader who said, “If I begin with my March 2000 balance, add in my contributions and employer match (which has subsequently been discontinued) and factor in a minimal 3% annual growth – I am currently at 45% of that number.”

Another reader said that the impact was so great “…because unless you had the wisdom of Solomon, the vision of the Psychic Network, the capabilities of Martha Stewart & Co. for insider trading, or just the dumb luck of the Irish, no one could predict this coming for this duration.”   Then there was the group that took the “are you kidding?” tact.   As one noted, “A great deal.   I couldn’t believe when I read the Merrill Lynch survey results.   Did their survey consist of three people?”   Or the reader who observed, “If there is anyone out there that hasn’t been affected ‘a great deal’ I would like to know who is managing their money.…”  

“Reality” Bits

Of course, as several readers pointed out, “great” is a matter of perspective.   One said, “The closer one is to retirement the more the perception of “a great deal” becomes reality.   The same results for a 40-yr-old might be labeled “somewhat affected.”   Furthermore, several readers expected our results to vary from the Merrill poll (where 19% said their balances were impacted only a little” and a full third said “not at all “).   “I think your results will be much different than Merrill Lynch’s (which were very surprising to me), as their survey participants are likely much less knowledgeable than yours,” said one.   

About28%said their retirement savings had been impacted “somewhat,” including this reader, who noted, “Our retirement accounts invested in mutual funds are down about 10% from three years ago, but that’s only because I got lucky in January 2000 and decided to transfer the bulk of our funds into the money market.   By April, I was so glad I took the advice of my mentor, ‘Hogs get ‘et.’    Anyway – guess I’d have to say B – somewhat – but why does it feel like A – a great deal?”

Roughly 8% said it had been impacted only a little, and less than 3% said “not at all” (some got “out” just in time, while some were never “in” stocks to begin with, and thus missed both the up – and down – side).

Good Behaviors?

Regardless of the impact on the account balance, a number of readers noted that the “impact” was a change (for good) in savings behaviors.   As one noted, “the amount that I now save for retirement increased over 150%.   I guess the last three years have been a sobering experience causing me to pause and think about expenditures and encouraged me to save more for retirement.”  Many said they felt they still had time to make it up (while others, several within 5 years of retirement, were not so optimistic).  

Of course, our readers lead complicated lives – which can sometimes make responding to a “simple” multiple-choice survey complicated.   There was the reader who noted, “In response to your question below, I view my retirement savings plans as four separate components; IRA Accounts (Traditional, Roth, Rollover) (a) a great deal, Employee Stock Ownership Plan (ESOP) (b) somewhat, 401(k) Plan (c) somewhat, and Social Security Benefits (d) not at all.”  Or the reader who noted, “In response to today’s survey I think that at one time or another my retirement savings has felt all of the options you listed. The order would go like this a; b; c; d; with d; being the most recent response (thank goodness).”

There were some really clever responses this week (as usual).   One noted, ” My retirement plan is an ESOP.   Three years ago the average account balance was approximately $200K.   Today the average participant’s balance is about $50K.   Our participants have been spared the wrath of the media unlike Enron and UAL, but nevertheless they have felt and continue to feel significant pain and worry about their retirement.   Some participants used to refer to the plan as ‘Golden handcuffs,’ now they call it $^$%$^*&*&!!!.”

Or the reader who said, “My balance is about where it was three years ago. Hmmm, didn’t I invest a lot since then?”

But this week’sEditor’s Choicemanaged to keep things in perspective.   “The bigger issue though was how did I feel about it, and I’m glad to say that I was taking the longer viewpoint.   I didn’t juggle my asset mix or move out of the market.   I knew I was working with prior gains so I kept my perspective…. Oh, and I just didn’t open the statements (then).”

Thanks to EVERYONE who participated in our survey!

a) A great deal.   It's been very painful that past three years watching my account balances decrease by 20+%.   I'm still holding, though, to my philosophy of thinking "long term."

a.    IRS and stock accounts down 50%.   That is the good news.   6 months ago both accounts were lower.   It is a long road back, but we are "pressing on" the return trip.

B.   I have a fairly long time horizon, and I can take some volatility.

The last 3 years have not been pretty.     My balance continues to go up, but only because I'm putting money into my account every payday.    My employer makes a small match.   But the losses eat up the match and part of my contribution.     Like you, I opened my last statement and was pleasantly surprised to see gains in all categories.    Not large ones, but at least they were gains!

(a) A great deal, would like to be back in two years to where I was three years ago.

Great survey question.   I think the answer really has to do with two things: perception and knowledge.   I think your results will be much different than Merrill Lynch's (which were very surprising to me), as their survey participants are likely much less knowledgeable than yours.   Beyond that, you have perception:   The "glass half full"-ers who think that, while the bear was pretty bad, it's back on track now, and it could have been worse.   The "glass half-empty"-ers (and those who are closest to retirement - or hoped to be) really felt the brunt heavily, and don't feel like they'll ever regain what they've lost, especially if retirement is only a couple of years away, and they were heavily invested in equities.

Being an optimistic person myself, and given that I have over 20 years to retirement, my perspective is that I was impacted "b" - somewhat.

(a) Stuck to the equity/fixed investment percentages I had selected for my 401k and tried to think of it as buying on "sale".   I have never ignored the fact the market could go way down.

But now, that it is going up I'm reaping more benefit than the people who switched to fixed or just gave up on putting more money into the 401k.

The market's impact over the last 3 years has been (c) only a little; which pales in comparison to the effect of my divorce.

My retirement plans have been affected a great deal.   Currently, at age 62, I'm now planning to work beyond age 65 instead of retiring a little early.

A) A great deal.   Even with the good year we're having and a shift to bonds in early 2002, I'm still 25% below my Y2K highs.

As expected on a bad market, my personal retirement savings decreased due to market fall, however, the amount that I now save for retirement increased over 150%.   I guess the last three years have been a sobering experience causing me to pause and think about expenditures and encouraged me to save more for retirement.   I am now seeing my retirement account increases and provide me with some very reasonable returns.   All in all, I feel that I weathered the last three years well.

In response to today's survey I think that at one time or another my retirement savings has felt all of the options you listed. The order would go like this a; b; c; d; with d; being the most recent response (thank goodness).

Our retirement accounts invested in mutual funds are down about 10% from three years ago, but that's only because I got lucky in January 2000 and decided to transfer the bulk of our funds into the money market.   By April, I was so glad I took the advice of my mentor, "Hogs get 'et."    Anyway - guess I'd have to say B - somewhat - but why does it feel like A - a great deal?

a) A great deal.   But I think that the effect is short term.   I didn't earn anything for three years and took losses on top of that.   But since I am saving for retirement, I have a reasonably long time to recoup the losses.   I took some profits just as the market was taking a downturn and I am glad I did.   Other than that, I have kept my portfolios diversified with a good equity position so that I can take advantage of any market upswings.   (That is the reason for some of my losses!!!)

My husband and are very conservative, careful with our money ... yet, when I look at my statements, I cannot help but think, we should both have gone around the world on the Queen Elizabeth.   Not having done so, this, I suppose, is our "little" contribution to keeping us safe and keeping and making some selected few wealthy.

I would say that our retirement (my husband's and mine) has been affected a great deal.   The losses will take several years to recoup, and then the fact that we are now 3 -4 years behind here we wanted to be at this point in our lives is another issue.   My husband had hopes of retiring at 58, 12 years away, however due to the losses and the time it will take to recoup these losses he may be working until 62 or older now, especially if another downturn comes along.   However it was great this past quarter to see a big improvement...let's hope it lasts a few quarters!

b) Somewhat

It's actually back to the same level it was 3 years ago.   If I had not been making contributions all along, it would feel a lot better.   However, considering that there was a substantial increase in investments before then, I've got no reason to complain.   It has also given me a chance to buy a lot more shares at what I hope will be a discount when I eventually retire (or need to remove to pay college tuitions).

I believe that it was about 3 years ago that a financial planner reviewed our situation and felt that the one are that we did not have any concerns was in the retirement area.   It's probably less rosy now.

A. A great Deal. Lost about 25% over last three years.

If I begin with my March 2000 balance, add in my contributions and employer match (which has subsequently been discontinued) and factor in a minimal 3% annual growth - I am currently at 45% of that number.   So I would have to say I am in category (a) "affected a great deal".

My projections 5 years ago (at age 55) of my account value at age 62 and 65, using a conservative (at that time) 8% rate of return, are about 70% of the amount I wanted to have.   So I would choose (a) because at age 60, I don't have time to make it up unless the stock market shoots for the moon again.   No, maybe (b) because I will get to do some, but not all, of the wonderful retirement things I had planned.   Maybe (c) because, even with what is left, I am very proud of myself for socking away an amount of money which, in my youth, I never imagined would be all mine, except for taxes, and that's (a), A Great Deal that knocks another hole in (b) Somewhat eliminating everything from my retirement list, leaving (c) Very Little.

My account balance has been affected (b) somewhat.   But, I'm just following the expert's advice, and continuing to ride it out.   Of more interest to me is the changes that have been made to our DB plan, namely a lower benefit and a later retirement age.   I have no control over what my employer does with that, but I can control my 401(k).

A - a great deal.  

Without doing a precise calculation, I would estimate that peak to trough, my total household accounts dropped by 25% and have rebounded 10% (which is only 7.5% of the original).   If the growth year to date had been on top of the peak level (or even 10% below the peak!), I would be in much better shape.   The net effect will be to lose 4 - 5 years of value accumulation by the time the market declined and then (hopefully) recovers.   That might not matter as much to someone in their 30's, but once you cross the 50-year line, those years of accumulation are precious.

(a) Great deal

I'm 100% invested in growth.   At one point in this bear market, I had less money in my account than I did 5 years ago and that was with me and my company adding a combined total of 13% of my annual compensation a year in contributions and matches.   As of today, I'm still not back to my all time high, but at least I'm within shouting distance of it.

Since I have been in the 401(k) business for almost 16 years now, today's survey question is especially interesting to me.

If I measure it in terms of market value lost over the last few years, I would definitely choose: a) a great deal.   However, if I consider how much impact the last few years has had on my long term retirement plans, I would probably (and hopefully) choose: (c) only a little.

(b) Somewhat.

I have an IRA and my company-sponsored 401(k) for my retirement savings.   While it has been difficult watching my IRA drop over 50% of its value at one point (I no longer contribute to it since I have the 401(k)), I know that I am Dollar-Cost Averaging in my 401(k) and that takes the sting out of it.   It was nice to see the increase in my 401(k) on my latest statement because of that and the rise in the market.

A great deal.   I couldn't believe when I read the Merrill Lynch survey results.   Did their survey consist of three people?

Put me down for the somewhat category.   At its worst, my account was down 12 - 14% and, if I recall properly, that's what the accountants call "material".   The bigger issue though was how did I feel about it and I'm glad to say that I was taking the longer viewpoint.   I didn't juggle my asset mix or move out of the market.   I knew I was working with prior gains so I kept my perspective.   Oh, and I just didn't open the statements (then).

My $130,000 rollover IRA (in 1998) grew to a peak of $204,989 in March 2000 on the strength of 75% equities, 20% equity mutual funds, and 5% high-yield bond mutual fund.

I held onto all my investments and the account bottomed-out at $60,653 in March 2003.   It has climbed now back up to $78,564 as of the end of July 2003.

Total investment loss in my 401(k) plan account since March 2000 has been 12.5%.   My 401(k) has been invested in roughly 55% equity mutual funds and 45% bond and money market mutual funds during this entire period.   Retirement savings outside my 401(k), almost exclusively equity (roughly 2/3 individual stocks and 1/3 equity mutual funds) have decreased in value a total of approximately 25% over the same period.

If there is anyone out there that it hasn't been effected "a great deal" I would like to know who is managing their money... I have money in two separate plans and it is safe to say that they have both lost about 1/2 of their value... What is even more interesting - and I hate that I did this - in Nov 99 (and it is written on my statement so I have evidence) I evaluated my portfolio to see if I should cash out some really big gains. At the time, I took the advice of someone more experienced than myself (ha, ha) and didn't cash anything because "the market typically goes down in January" I was told... Needless to say - I could kick myself, I knew that I had gotten greedy & didn't act on it... two stocks that I had more than doubled my investment...worldcom & global crossing...

In response to your question below, I view my retirement savings plans as four separate components.

1.   IRA Accounts (Traditional, Roth, Rollover) (a) a great deal

2.   Employee Stock Ownership Plan (ESOP) (b) somewhat

3.   401(k) Plan (c) somewhat

4.   Social Security Benefits (d) not at all

Overall it appears that steady and persistent savings plan invested in a diversified portfolio still works!

I retired 9/2000 and since that time my 401k has decreased by more than 50%, although I did have a good previous quarter this year that has brought the loss to just at 50%.  

Unfortunately, I worked in the tech/telecom industry (Lucent Technologies) and saw my former employer's stock go from about $65/share when I retired to about $1.79 a share yesterday... which is better than at the last shareholder meeting where a vote was taken to allow a reverse stock split which fortunately didn't happen.   Unfortunately I was too heavily invested in company stock and had real faith in the company - the match was required to be in stock.

On the upside, the company has cut it's quarterly loses, my pension and medical benefits are still provided by the company, although for how long I don't know.   Also, another real problem in all this was the small number of shares of stock I accumulated for about 6 or 7 companies that were merged, spun, acquired, etc. that raised havoc with filing taxes!   Finally, I cut my losses and got rid of everything outside my 401k - ESOP, etc.   I currently work for a homebuilder, which is a great industry to be in right now!!

I have to say a great deal (a).   I suppose that needs a little qualification so I don't fall into "Bush Bashing" favor.   I don't believe the economy is bad and I certainly don't believe the market has been bad for quite some time.   In the past four months I've gained a good 20%, in the several months before that about another 8% gain.   To say the market has been bad recently is to follow the majority of the press and not allow the facts to sway my beliefs.   However, over the past three years as a whole, still hurting some.   My more conservative accounts are either at break even or have slight gains while the more aggressive ones still have some ground to cover before I'm fully back at three years ago factoring out new deposits.   It's all part of the natural cycle of investing.   Three years is too short of a period to get a reliable read.   If you ask how I've done over the past ten years, overall I'm just a hair better than historical market returns.  

The US is very, very cool!   In other economies you really do have to take from a fixed pie, in the US we still have the ability to make our own without taking someone else's slice.   The market over the next few months will yield better than average mining opportunities.   Don't let them get away, and do your own solid research, there's also a lot of fool's gold in the hills.   

Well, there is no question that those funds that used WorldCom and Enron as base investments have suffered permanent damage that will not be recovered. However, many of the funds have solid companies that, in my opinion, are undervalued on an historical basis.   As soon as the economy comes back, and their earnings return to normal, they should see an upward trend in stock prices.   Hopefully I have bought the right ones while the market is down.   Some individual stocks also are low compared to their historical trends. I hurt myself by selling out of some stocks that did quite well during this time (Lone Star Steakhouse and Paccar).

1. Today's question -- half way between a and b. The havoc we have seen to date in the investment markets has postponed my projected retirement date by a year to 18 months. (Will you promise me that it is over?)

(b) Somewhat.   The peak was early-mid March 2000.   From that point through now, we are within 10% of those peak balances.   Of course we have been making contributions ($100,000) that have made up a lot of that.   However, looking back 4-5 years.... we are way ahead of those balances today.   Many people lost "paper profits" over the last 3 years and if they keep contributing and don't get piggy with their investment choices...their retirement will be in line with reality and not off on the dreams generated by assuming they would earn 30%+ per year forever.

A GREAT Deal...     I bought too heavily into WorldCom and it ate my lunch and many future steak and lobster dinners planned in the Caribbean.

(a) A great deal.   Unfortunately I had the foresight (?) to roll one account into a tech fund just before the bottom fell out.   As painful as the last few years have been, I realized that my investments were still worth more than I initially invested, and because of dollar cost averaging,

I will eventually be better off because of the downturn than I would have been had the market continued its climb.

I'd have to say (b) somewhat.  

My IRA's have been hit harder than my 401(k) has been, but that is because I stopped putting money into the more risky funds and put new contributions into safer bonds.   I tend to manage the 401(k) portfolio more than I do the IRA portfolio.   In the IRA portfolio, I pick an investment philosophy and review it annually, but rarely take an active part in managing the portfolio.   As a result I believe it will take longer for the IRA portfolio to recover lost earnings.  

----> B

I'm lucky I have a number of years before I retire to ride out the highs and lows.   A few coworkers have regularly taken the opportunity to complain about their negative returns, but more recently are happier with positive gains.   I didn't let myself get stressed about it, everything was on sale!

I will have to say b - somewhat - while the balance is not what I anticipated a few years back - when we first had available to us projection tools and I projected out 15 years I now am where I expected to be.

My retirement plan is an ESOP.   Three years ago the average account balance was approximately $200K.   Today the average participant's balance is about $50K.   Our participants have been sparred the wrath of the media unlike Enron and UAL, but nevertheless they have felt and continue to feel significant pain and worry about their retirement.   Some participants used to refer to the plan as "Golden handcuffs", now they call it $^$%$^*&*&!!!.

What has the impact of the last three years been on "my" retirement savings?

a) A great deal, down 40% at the lowest point.

(a) A great deal (in the downward direction).   Although it was discouraging to continue to fund my 401(k) when I was losing more than my contribution, I justified it by believing that I was buying at the low.  

Counting my contribution (maximum), company match (fifty cents for every dollar I contribute), I am now almost even in dollars with where I was in March 2000.

If I were sincere in taking the long term view, I would have to answer (c) Only a little.   I think it was best put by a young man who said his hope was that the market would stay down for a few more years so he could pick up more shares of his investments while they were cheap.   Then, just before he plans to retire, he wanted to see the market come back.  

I didn't dump my portfolio while I watched it decline.   I still have the shares (and the new ones added each payday).   I am just waiting for the market to make a recovery before I retire ... and I have time on my side.

The answer for us would be (b) somewhat.   What really occurred was that we did not achieve the gains that we had projected, rather than losing money.   More directly, we were kept from achieving above projected returns by having to average in no gain, up to last October, which represented the very significant low point in U.S. equity markets.   However, most analysts never saw the current equity market upturn coming, and utilized the February - March 2003 short term correction as justification for their continued predictions of market disaster - just more examples of market gurus showing their genius for predicting history.

Some of these gurus were also recommending the purchase of long term treasuries in the first quarter of this year.   Short term reactions again!

The answer to the lack of true market prognosticators is, of course, for investors to select a mix of asset classes, which fits their time horizons, and to rebalance their portfolios to that mix on an annual basis.   Some DC plans have built this technique into their plans on an automatic basis - all of them should.   Kudos to Colorado's 457 plan for implementing this feature last year.

Thanks for another good survey subject.

A); because unless you had the wisdom of Solomon, the vision of the Psychic Network, the capabilities of Martha Stewart & Co. for insider trading, or just the dumb luck of the Irish no one could predict this coming for this duration (not even Bob Brinker)!

In the words of former President Bush, "stay the course" (with the equity markets).

My deferred compensation savings have deteriorated by about three annual salary payments but I am still so far ahead of "cost" that it is only an interesting footnote, not a newsworthy event.   Being invested exclusively in equities commencing in 1979 and saving the maximum under the plan has been rewarding, very much so.  

Survey reply:   A -- a great deal.   The closer one is to retirement the more the perception of "a great deal" becomes reality.   The same results for a 40-yr-old might be labeled "somewhat affected".

My 401(k) account balances scared me so that I didn't look at them for months - literally!   I finally got the nerve to view them in May and to my surprise, I saw numbers that I had never seen before!   I haven't looked since...

Your answer options should have each included a percentage decline.   Perceptions will differ so 15% may be "somewhat" to one and "a little" to another.   Regardless, continuing contributions will really mask the problem for most everyone.   Most people will look at ending balance to determine their progress.   If it stays the same they'll mistakenly think little impact.   However negative earnings were covered by additional contributions. My answer is (b) somewhat.

The last 3 years was a great learning experience.   I had negative earnings, which is of course very discouraging.   Even though I had negative earnings, my asset allocation was correct for me.   This was all confirmed by being able to sleep at night and not checking my account everyday as it continued to lose money. The hardest thing to truly learn is your own risk tolerance and then pick an asset allocation to match it.   Now I know I passed the test!

For me, the answer would have to be (a), but not in the way you'd think.

Three years ago (what timing!) I moved from a non-profit (and thus, low-contribution) organization to my current (very generous contributions) employer.   What little had accumulated in the prior years I ended up withdrawing in a lump-sum since I knew it would be of more help towards purchasing a new home than any measly returns I could have made on my measly sum (in hindsight, I look like a genius!).  

So, in essence, I started out three years ago from scratch - So today my statement looks amazing! Anything greater than 0 is way better than 0.    (The question remains, how much better would it look if we hadn't been going through this market...) But I can't complain.   

Before looking, I would have said (b) somewhat.   However, after taking a good look at the last one and a half years (the only history readily available), I now realize the appropriate answer is (a) a great deal.   The good news out of this economic climate is that it has spurred me on to do something I should have done a long time ago -- I have increased the amount that I am saving, significantly.   I had to do something to make up for lost ground.   And optimistically speaking, I am well positioned for the recovery -- if it ever happens.

While the past quarter was very good to my 401(k), I have taken a significant hit in the past couple of years.   In 2002, the account did not grow at all even though I continued to put in almost the maximum amount allowed.   I did reallocate late last year and that appears to be helping.

The impact of the last three years been on my retirement savings has been (b) somewhat.   I invest in riskier options, so I expect volatility.   However, it was kind of depressing to see that my contributions were often not enough to offset the losses that I incurred over time.   Things are looking up.   I just kept reminding myself that historically, the market has gone back to a higher point than it was before it went down.

b) Somewhat fortunately I have over 10 years until retirement.

a) A great deal, but probably not as it relates to most others.   The impact from the last three years has been great for my retirement savings!   My 401k gained 8k on 40k(which we just started to offer in 2001) and my ESOP went from 230k to 522k!  

Impact on my retirement savings?   "A", a great deal.   As I am only 4 year away from retiring, I don't have enough working years left to recover the loss.   It's just been the past quarter that my 401(k) has begun to show a positive number.   Prior to that, all my investments had been losing, or at best, my contributions were equal to the loss for the quarter.   It's hard to see my maximum contributions + catch up contributions not make any positive difference in my account balance.

A) A great deal.   The NASDQ is still quite a bit off its high.   I wonder if, like Japan, I will live to see it reach 5000 again.

I'm depressed just thinking about it.   I have lost over the last 2 1/2 years 34% of my retirement savings.   I guess you have to look at it this way, over the last 10 years we have had a great ride, but the goods times are over I'm afraid.

B - somewhat

It's been more of a psychological change.   Everyone else was panicking, so I figured I must do something.   However, I always try to remember I'm in it for the long haul.   There was a huge struggle between my mind and my heart. I did make a small change to get everything back in line, but now I'm probably more risk adverse than before.

Personally none - because I went to cash in December 1999 seeing all this coming.   Just wish I had gone into a bond fund instead of a MMF.   BUT given what I saved by doing this, I'm not complaining.   I continued to defer the max each yr including catch-up in 2002 & 2003.

For our plan - there was little impact on participation or deferral rates.    Overall, there was some movement from equities to the MMF and bond fund.

My 401k has been affected a great deal by the last three years and it has all been negatively.

For your survey, when limited to the past three years, my answer would be "only a little." Some of us have been in money-market like investments for the entire time, and years before. So we have missed the carnage of the last three years, but also have "missed" the gains of the years preceding that.

A GREAT DEAL! But not as bad as some of my peers. You should have put a category for devastated.

My balance is about where it was three years ago. Hmmm, didn't I invest a lot since then?

I would have to say a.   The last three years has taken a huge bite out of my investments.   I may never see the principle recovered let alone any profit.   But hey, I helped a financial planner get a little bit richer off of me....