Sep 10 2009

My 401(k) is Over Its Pre-Crash Value!

I braved my last 401(k) statement yesterday and lo and behold, what to my wondering eyes should appear but a fully reconstituted 401(k) balance!

It got pretty ugly around November of last year, and I quite frankly stopped looking.

401(k) value - 2009But that doesn’t mean I ignored it completely. I ramped up my contributions around January by another 3% of my salary, so I could make the most of the downturn.

That simple strategy – stay put, and invest more – brought the value of my retirement savings past the pre-crash level in just 10 months.

As The Dividend Growth Investor outlines, since 1956 it has taken on average 2.8 years for the market to recover from a bear market loss.

To be fair, some of my recovery is due to contributions to the plan, but those contribution also magnified the gain from the stock market and that’s the point. Increasing your investment in broad-based funds or ETF’s when the market is down amplify the eventual recovery. Think of it as extra fuel that ignites when the market turns around and increases the velocity of the recovery.

Financial rocket science, it’s a beautiful thing.


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2 Responses to “My 401(k) is Over Its Pre-Crash Value!”

  1. [...] rate to offset the loss of company match, and I am convinced that it is a large part of why my 401k balance recovered so quickly from the crash of [...]

  2. [...] I saved more. And the result was that my balance was over its pre-crash value in September, 2009. [...]

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