We’ve been through this before, recessions and market downturns and high unemployment. There are cycles and there always will be ups and downs. In addition, some workers hold jobs more susceptible to employment risks than others.
- Younger works have an investment opportunity, even if they are temporarily out of work.
- Middle age workers have time to recover.
- Pre-retirement workers should have their investments aligned for less risk if they plan to draw on the assets in the near term.
- Retired workers are in the best position with most having Social Security. In any case, their assets should be diversified to minimize market risk in favor of stability and income generation.
The quote below talks about low income workers being less likely to have substantial assets in 401(k). That’s true, but it is also true everything is relative. If you were a low income earner all your life, Social Security will replace 40% of income or more. You don’t need a million dollars in a 401k to live in retirement.
But, in any recession, Social Security is a stabilizing force. Today, it represents a large share of older workers’ wealth just as it did a decade ago. And lower- and middle-income workers’ benefits are a much larger share of wealth, because they are far less likely to have substantial assets in 401(k)s.