Posted April 26, 2019 by Ben Carlson
Sam’s entire family has terrible luck when it comes to the timing of their retirement.
Sam’s great-grandparents retired at the end of 1928. Over the ensuing three years or so the stock market would drop close to 90% while the U.S. economy would contract nearly 30% in the Great Depression. In 1937, the stock market would be cut in half and a couple of years later World War II would commence.
Sam’s grandparents didn’t fare much better, retiring at the tail end of 1972. This was right before a brutal bear market which would see stocks cut in half from 1973 to 1974. The purchasing power of their portfolio would also be ravaged by inflation, which would run at a rate of 121% over the first 9 years of their retirement (more than 9.2%/year). From 1973 to 1981, the S&P 500 would lose 33% of its value in real terms.
Finally, Sam’s parents retired at the end of 1999, feeling pretty good about where they stood following the enormous tech-fueled bull market of the 1990s. In the first decade of their retirement, they would witness the U.S. stock market go down by half on two separate occasions with corresponding recessions in each instance. Over the first decade of their retirement, the S&P 500 would fall close to 10% in total.
Less than 20 years later, Sam is considering retiring early after catching the FIRE bug. Sam’s biggest worry is the possibility of retiring just before a market crash like the rest of her family.
Should Sam be worried? What if you retire just before a stock market peak? Find out here >> A Wealth of Common Sense