Americans lament the state of their $401,000 plans as stock markets plummet

Americans lament the state of their 1,000 plans as stock markets plummet

Wall Street’s ongoing slump is beginning to raise concern among Americans about their retirement savings, potentially urging some to delay retirement as bank balances dwindle.

So far this year, the benchmark S&P 500 is down 18 percent, stripping $7 trillion of market value from companies in the index. The Dow Jones Industrial Average is down almost 14 percent.

Bonds, the traditional safe haven for those nearing retirement age, have also performed poorly amid high inflation and rising interest rates, with Vanguard’s Total Bond Market Index Fund down more than 9 percent year-to-date.

Because retirement savings like 401,000 and IRA accounts are typically invested in a mix of stocks and bonds, the resulting losses are a concern for many savers.

“My 401k is now a 301k,” lamented one Twitter user.

Americans lament the state of their 1,000 plans as stock markets plummet

So far this year, the benchmark S&P 500 is down 18 percent, stripping $7 trillion of market value from companies in the index

“Just checked out my 401k for the first time in a while. I hope your day goes better,” joked MLB analyst Ryan M. Spaeder.

Podcaster Lauren Goode tweeted, “Password manager apps should now literally have an ‘Are you sure you want to log in to your 401k’ popup.”

For younger Americans who haven’t yet experienced a market downturn, double-digit declines in their retirement savings can seem particularly troubling.

But experts say those with decades left before retirement shouldn’t spend much time worrying about paper losses on their retirement accounts right now.

Historically, even severe market declines of 20 to 40 percent only last about 14 months, and the S&P 500 rises about three out of four years, according to CNBC.

For older Americans nearing retirement, the simultaneous withdrawal from stocks and bonds could be a cause for greater concern and even a reassessment of retirement plans.

According to the Investment Company Institute, approximately 60 million Americans have 401,000 plans with total assets of approximately $7.3 trillion.

The nation’s total retirement savings — including IRAs and employer-funded plans — were valued at $37.2 trillion last summer.

On Thursday, the S&P 500 crept toward confirmation of a bear market, Wall Street's term for a 20 percent decline from recent highs.  Pictured: traders on the NYSE

On Thursday, the S&P 500 crept toward confirmation of a bear market, Wall Street’s term for a 20 percent decline from recent highs. Pictured: traders on the NYSE

The Dow Jones Industrial Average is down nearly 14 percent so far this year

The Dow Jones Industrial Average is down nearly 14 percent so far this year

On Thursday, the S&P 500 crept toward confirmation of a bear market, Wall Street’s term for a 20 percent decline from recent highs.

Once-hot tech stocks have led the decline, with Apple, Amazon, Facebook parent Meta and Google parent Alphabet all down more than 20 percent so far this year.

Netflix was the worst performer on the S&P 500, down a staggering 71 percent since late December.

“The pullback in growth stocks, particularly in technology, has been dramatic,” Brian Price, head of investment management at Commonwealth Financial Network, told Reuters.

“We think we may have gone too far too quickly on many of these stocks.

Inflation and rising interest rates have hurt so-called growth stocks, most of which have forecast earnings far in the future and are trading at multiples of their current earnings.

The Labor Department reported Thursday that wholesale prices rose 11 percent in April from a year earlier.

US wholesale inflation rose 11% year over year in April, down slightly from March but still near record highs

US wholesale inflation rose 11% year over year in April, down slightly from March but still near record highs

Many of the costs at the wholesale level are passed on to consumers as companies try to cover higher expenses. This has raised further concerns about a possible slowdown in spending, which could hurt economic growth.

Also on Wednesday, the Labor Department’s consumer price report came in hotter than Wall Street was expecting.

It also showed a stronger-than-expected rise in prices outside of food and gasoline, something economists call “core inflation” and which is better at predicting future trends.

Rising inflation has prompted the Federal Reserve to pull its short-term benchmark interest rate from its near-zero record low, where it spent most of the pandemic.

It also said it could continue raising rates by double the usual amount at forthcoming meetings. Investors fear that the central bank could trigger a recession if it hikes rates too high or too quickly.

Consumer price data for April showed inflation rising 8.3% yoy last month

Consumer price data for April showed inflation rising 8.3% yoy last month

Inflation has been exacerbated by Russia’s invasion of Ukraine and the conflict is affecting rising energy prices. China’s recent lockdowns amid concerns of a COVID-19 resurgence have also exacerbated supply chain and manufacturing issues at the heart of rising inflation.

The impact of higher consumer prices was global. On Thursday, Britain said its economy grew at the slowest pace in a year in the first quarter. This fuels fears that the country is headed for a recession.

Investors are also closely watching the latest round of corporate earnings as they assess how companies and sectors are coping with inflationary pressures.

“We’ll continue to pay attention to what the Fed has to say, but it’s worth paying attention to corporate prospects on earnings calls,” Price said.

‘That’s something investors will focus more and more on over the second half of the year, which is how durable corporate earnings are.’

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