It’s been nine years since the height of the Great Recession: the day the stock market bottomed out. We’ve enjoyed a pretty calm ride, especially over the past year and a half. But volatility returned on Wall Street in February, and many of us are wondering what’s next. What can we learn from the Great Recession when it comes to our money? Tony Drake, CFP® talks with WTMJ about the details.


On March 6, 2009, the S&P 500 market index bottomed out, hitting an intra-day low of 666. Three days later, on March 9th, the S&P closed at its lowest point of the Great Recession, 676 points. Since that day, stocks have gone pretty much in one direction: up! It’s grown more than 300%, and today the index is above 2,700. We’ve enjoyed a pretty calm ride, especially over the past year and a half. But volatility returned on Wall Street in February, and many of us are wondering what’s next.

Think Long-Term

401(k) statements were looking depressing as stocks kept dropping during the Great Recession; they kept dropping in value. But, most investors who stuck with a long-term plan and continued to save money are in a lot better shape today. The average baby boomer’s account has more than tripled since the Great Recession. Of course, we can’t predict what’s coming next, but investors should have a solid financial plan built on long-term growth.

Age Matters

The Great Recession had a much different impact depending on your age and position in life. Let’s take a look.

Younger workers in their 20s and 30s had time to wait for stocks to recover. However, the Great Recession left its scars in another way, leaving many millennials fearful of the market. Even though they have the benefit of time, young workers are risk averse, preferring to put their money into cash rather than invest it. It is difficult to get the kind of growth you will need on your money by leaving it in a simple savings account.

A big dip on Wall Street can be devastating to someone who needs their 401(k) to fund their retirement in a few years, but for these workers, their financial struggles started even before the recession. The years leading up to the recession are sometimes called “The Lost Decade.” Job growth was stagnant, and so were stocks, hitting these 50-somethings in the prime time of their careers. Many older workers were covered by employer-sponsored pensions, but others needed to delay their retirement in the wake of the Great Recession.

People in retirement during the Great Recession weren’t holding jobs, so they were protected from the troubled labor market. Many also owned their homes outright, so the housing instability was less than an issue. However, research shows many older Americans were affected by the Great Recession through their family members. Many older adults used their savings to help adult children.


Having a diversified portfolio is important because it can lower your risk. If you’re diversified, when one area of the stock market is performing poorly, you can make up for it with gains in other areas. Basically, it’s like not putting your eggs in one basket. Investors are getting the message about the importance of diversification. During the Great Recession, 26% of people saving in their employer-sponsored retirement accounts had either 100% stocks or 100% bonds. Today, that number is down to 11%.

Target date funds have helped because they have built-in diversification. A target date fund is a mutual fund that is designed to provide the proper asset allocation based on the year you want to retire. They are popular in 401(k)s because they are simple. Let’s say you want to retire in 2025 – you pick the 2025 target date fund instead of having to choose individual investments. Target date funds work better for younger workers, as you get closer to retirement, I recommend talking with a financial advisor who can help you build an individualized portfolio based on your age and risk tolerance.

Invest With a Purpose

We are in the second-longest bull run in Wall Street history. As we mentioned earlier, the major stock market indices have risen more than 300% over the past nine years. But I caution you against comparing your own investments to those major indices. If you want the same growth as the S&P 500 or the Dow Jones, you would have to take on the same amount of risk.

Instead of comparing, invest with a purpose. Every investment should have a purpose at the time of purchase, and you should keep that in mind throughout market fluctuations. Create a written record of each investment’s strengths and weaknesses, along with a list of the triggers that would be a reason to sell. Research shows people who have a purpose and a long-term plan for their investments perform better in the stock market. They’re able to keep their emotions in check when the market takes a downturn.

Control What You Can

Let’s face it; we can plan and prepare for turbulence on Wall Street, but we can’t control it. We can control other factors:

  • How much debt do we have? Americans have more than $13 trillion in debt, including mortgages, car loans, student loans and credit card debt. Six in ten people said their debt is making it difficult for them to save for retirement.
  • What is in our emergency fund? An emergency fund can help you during difficult financial situations. I recommend having enough in your emergency fund to cover three to six months’ worth of expenses.
  • How much are we saving? Americans are woefully underprepared for retirement. A new survey shows four in ten Americans have less than $10,000 saved for retirement. You can get an idea of how much you should have saved with a retirement calculator. A financial professional can help you refine that number and create a plan to get you there.


The Retirement Ready radio show is featured every Saturday on WTMJ 620 AM at 1:00 pm. We will bring you information on: Social Security options, retirement trends, options to retire with life changes and achieving a secure financial future. Listen live here: WTMJ 620AM LIVE

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification does not guarantee profit nor is it guaranteed to protect assets. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Drake & Associates does not offer tax or legal advice.