Retirement Rescue

Sometimes our investment actions don't work out well. Sometimes it can even be disastrous. I've talked to more than a few persons over the years who did one of these things:

1. Gambled on a risky trading system in forex (currencies), futures, options, or stocks and had massive losses.

2. Got out of the market at the bottom of 2008 and never got back in.

3. Heavily concentrated a portfolio in a trendy stock that then proceeded to drop precipitously.

What now? What do you do after the massive loss to restore your retirement plan?

Consider it Tuition in the School of Investing

It can be very, very difficult to get over large losses. There may be conflict in your marriage because of the loss as well. It hurts and there is no getting around that. When you look at what could have been, it can be agonizing. The least you can do, then, is learn from it. One of the biggest lessons I've had to learn as an investor over the last 20 years is that magical returns are more about luck than skill. That is, it is very difficult to get long-term returns higher than 12-15% or so (and those returns come with significant risk!). Sure, you could have some blockbuster years that even result in higher than 100% returns. But if you are getting that kind of upside, the downside can be very steep indeed.

Don't misunderstand me, there are always some interesting trails I'm pursuing with regard to investment returns. However, I'm fully convinced that there are no free rides in the investment world. If you want a big win, you will have to be able to stomach a big loss.

Develop a Plan with Realistic Returns

You may have to make some adjustments to be able to retire if the loss was significant. Perhaps you will need to work a few extra years. Maybe you just need to downsize your home sooner. You may just need to work part-time a few years and then take Social Security later (age 70) in order to get the maximum payout.

Developing a plan that looks forward to your income needs over the coming years will help you see what changes you need to make.

Master the Basics of Investing

Don't compound your difficulty by making another bad investment decision. Get educated about investing. Whether you work with an advisor or do it on your own, you need to know enough to determine if you are getting what you need from the market. There is no shortcut. You just need to learn some basics so that you can evaluate how you are doing, but really grasping the basics can take time. It is worth it!