tl;dr - by being too scared to invest during an economic downturn, I cost myself $235,000 in retirement savings.
Time-wise, this is not my exact situation, but it is extremely close. I've actually bumped it back two years to make it even worse, which should only go to prove my point.
I started working in a career that allowed me to save money right around the time of the last major recession. Due to the economic climate, I saved all of my money. I didn't invest it. I just saved it at the bank. Realistically speaking, I could have invested $5,000 a year and still had enough savings to be safe in case of emergency. But I was too scared to do so.
Because of that, over 10 years I ended up with $50,000 in the bank (plus a rather negligible amount in interest). But what if I had been putting $5000 a year, on January 2, into a Vanguard Target 2045 retirement account? Percentages for below are taken from the total return column on the fund's page.
Starting in 2008, that $5,000 would have been down to $3244.50. Ouch, right? -35.11% return. But keep doing the math. Add another $5,000 for the next January 2, 2009 deposit, then add 28.67% to account for the 2009 total return. Add another $5000 for January 2010, increase the new amount by 15.33% for that year's return, and so on and so forth.
The result? After ten years of investing, that would have left me at about $91,000. Already $41,000 ahead of my non-investment "strategy". Now, let's make it even more painful. Let's look at how this works out down the road.
With my $50,000 deposited today, untouched for 30 years at 6% growth, it would grow to about $287,000 in 2048. But with $91,000, it would grow to over $522,000 in that same time.
Moral of the story: even when things aren't looking great, if you can afford to invest some of your money, you really should do it. Don't leave yourself without an emergency fund. Don't live outside of your means. But if you are fortunate enough to have income left over to save and you've got decades to go before retiring, put that money to work for you even if the short term looks scary!
edit: fixed a huge typo - corrected to "don't leave yourself without an emergency fund". Hopefully people knew what I was trying to say.
Submitted December 15, 2018 at 12:40PM by HereForTheDucks https://ift.tt/2EnQ13l
