Do you really want your retirement in the stock market?

Remember a year or so ago when all the experts were saying that we needed to create a system where individuals could put part of their social security money in the stock market? How good an idea does that seem now?

Yes, over a long enough time the stock market out performs the return on investment that we get through social security. Great, I’ll have a larger retirement income - unless I need to retire this year! Anyone starting to draw their money in this market will loose money, a lot of money. While the amount of income from social security is not as great as the potential income from the market, it is much more secure. Well, until the politicians decide that if it’s OK for United Airlines to renege on pensions then it must be OK for the United States government to renege on social security.

One thing no one wanted to talk about when they were pushing the stock market option was that risk equals return. As the market conditions today (Friday, October 3, 2008) show when the risk is too great, the market corrects by lowering the price. We spent a longer time than normal in the “sweet spot” where risk (and the associated reward) was at the higher end of the acceptable scale. Now, many of those risky investments are proven to be much higher risk than the market accounted for.

The leading edge of the baby boom will start “cashing out” in the next 3 years or so. What impact will that have on the already troubled financial market?