Sunday, April 6, 2008

Will we really be able to retire?

This morning I logged onto Vanguard to look at my husband's Roth IRA as well as my own, and was in for a surprise. Since October 31, my Roth account has lost $1100 in value. My husband's Roth, invested in an entirely different fund, has lost $2300 in the same four weeks! OMG! We should withdraw all the funds and put them into cash or something more secure, shouldn't we, rather than risk losing any more?

Are you kidding me?

My husband and I are 25 years old, and by law, with a couple of exceptions, cannot enjoy the fruits of our retirement accounts for another 34 years. Surely the markets will have rebounded by then. Heck, they may rebound by Christmas, which would keep us from regaining our losses if we pulled out. Another important tidbit I failed to add is that despite my $1100 dive, I'm still up about 13% for the year. So my gain wasn't 28% or whatever. Big deal. I'm still not going to sniff at anything over 6%. My husband's funds have gained as well, though not as much as mine have (his are a lot more volatile and have been dippier this year). We haven't lost any of our initial investment, but isn't that a risk you take when lending money?

There are two lessons to be learned here. First one is don't panic. The market fluctuates, your investments can go up or down, and if you realize that you won't act irrationally and sell off before a big rally. The second lesson is not to follow your retirement accounts too closely (provided you're at least several years away from retirement). Vanguard, for example, sends a quarterly statement. When you're more than 20 years away from retirement, glancing over your funds every three months is about all the monitoring they need.

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