The patient suffered a cardiac arrest. A dangerous amount of
time has passed. Although the heart may be restarted, most
cardiac arrest patients suffer severe brain damage after such
delay.
But we are perversely fortunate.
This patient is not human. It's our banking system. It will be
restored to full functionality simply by restarting its heart and
getting money to flow again. Brain function is irrelevant because
the patient is brain-dead and always has been.
Knowing this, we need to change the questions we ask. Instead
of asking what our government, political party or banker can do
for us, we need to ask: What should we be doing for
ourselves?
Here's our list.
For most people, holding on is better than cashing out. The
stock market has always been a wild ride. It rewards those with
strong stomachs and great patience. The crash of 1929, for
instance, scared an entire generation. Yet by 1936 -- the middle
of the Great Depression -- anyone who had invested $1 in
large-cap stocks in early 1929 was holding $1.31, after adjusting
for inflation. One year later the initial investment was worth
only 83 cents in real terms. But by the time World War II ended,
the initial $1 was worth $1.69. Sixty years later -- in 2005 --
that dollar was worth more than $100 in real purchasing
power.
That's a great ride, with huge bumps. And it continues.
Between 1972 and 1974, an investment in equities lost nearly half
its real value. Between 2000 and 2003, U.S. equities took another
huge tumble -- almost 40 percent.
For young workers, this is an opportunity, not a disaster.
Younger workers with relatively secure employment should know
this is no time to sell. Low stock prices mean this is a good
time to contribute more to one's retirement plans. It will help
to invest those contributions in low-cost stock index funds.
There's only one caveat. Given the fiscal burden facing our
government, contributing to a Roth rather than a regular 401(k)
account may save you from higher future taxes.