Recouping Losses In Your IRA, 401k, and Retirement Accounts By Money Expert Bill Losey, CFP, CSA

www.BillLosey.com

Question: I´ve lost nearly 30% in my IRA this year and am wondering how long you think it will take before I get back to even. Should I get more defensive now? Your thoughts? Alexis, Los Angeles

Answer: Alexis, it will take at least a few years to get back to even, maybe a lot longer, depending on how your IRA is currently allocated. For example, a cash only portfolio or a bond only portfolio usually will take substantially longer to recover from the recent market declines than a diversified portfolio of 60% stocks and 40% bonds, or an all-stock portfolio.

Let´s assume an investor started with $100,000 in her IRA or 401k plan.

● If your investment is down 10% to $90k - you need to earn 11% to get back to even

● If your investment is down 20% to $80k - you need to earn 25% to get back to even

● If your investment is down 30% to $70k - you need to earn 43% to get back to even

● If your investment is down 40% to $60k - you need to earn 67% to get back to even

● If your investment is down 50% to $50k - you need to earn 100% to get back to even

In your case, assuming a 30% loss:

● It would take you 18 years to recover in an all cash portfolio (2% return assumed)

● It would take you 7.3 years to recover in an all bond portfolio (5% return assumed)

● It would take you 4.7 years to recover in a 60/40 portfolio (8% return assumed)

● It would take you 3.7 years to recover in an all stock portfolio (10% return assumed)

The rates of return used are for illustrative purposes only and are hypothetical in nature because we have no idea what we´ll actually earn.

Bill´s Bottom-line: Locking in losses and moving to low yielding alternatives during a market down turn can lengthen the time needed to recoup your IRA.

www.BillLosey.com

Bill Losey, CFP®, CSA, America's Retirement Strategist®, is the resident retirement planning expert on CNBC´s "On the Money". He has been named one of America´s Top Financial Planners and is the author of Retire in a Weekend! You can start a FREE subscription to Bill´s award-winning newsletter Retirement Intelligence and catch a sneak peek of his FREE DVD online at www.RetireinaWeekend.com.