My retirement savings is eroding away!

Dear Dave,

I’m 61, and I hope to be able to retire soon, but I’m watching my retirement savings completely eroding away day after day. The only place I’m not losing money is $180,000 I have sitting in the bank earning almost zero interest. What should I do? 

Jesse

Dear Jesse,

Come on, man. “Completely eroding away day after day?” That’s a little dramatic. One of the things you have to understand, and coming to grips with it has helped me since I began doing research on things like this 30 years ago, is we all have a drama queen living in our brain that exaggerates things—especially when it comes to investing. So, take a deep breath and calm down. Everything’s going to be okay.

Studies have shown us it takes $3 of gain in an investment to emotionally offset $1 of loss. Our brains record negative things at a much greater rate than they do positive things, and it takes a lot of emotion to recover from that. Your investments may be down a little. If you’ve got $1 million in there, it may be worth $900,000 right now. Next year, it’s liable to bounce up to $1.1 million. In other words, your entire retirement savings is not “eroding away.”

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