Crappy Times

These are difficult days to be blogging about money. There's lots to talk about, as the economy is front and center in the news, but sometimes it just gets depressing.
This week's crummy news is that my friend Mortimer got laid off. He thought his job was fairly secure but, surprise! It wasn't. He admitted to being in a state of shock and denial, but said he at least had some good connections who would recommend him for job opportunities once he updated his resume and started looking. He also said he figured it was time to join LinkedIn and Facebook to help him network. But his plan for the next day was to enjoy sleeping in and get some laundry done, while waiting for the boxes of his personal belongings from his old office to be delivered.
I didn't want to sound lecture-y, but I told Mortimer not to lose his momentum. He needs to tackle job-hunting with a vengeance and leave no stone unturned, starting today, not a few days from now.
Those who remember my previous stories about Mortimer will understand my concern. He was laid off once before, and it sent him into a tailspin of depression that coincided with some health problems. For a long time, he was paying for his own health insurance, up to about $900 a month. In the last few years, his finances finally recovered somewhat, but they're still precarious. He can't stay unemployed for long.
I would not want to be in his shoes right now, nor in the shoes of many other people I know who have been laid off, or had a spouse laid off. Some of these are people like Mortimer and me, who only have to take care of themselves, but others are parents with kids in college. If I'm a little freaked out these days, I can't imagine how they must feel.

Amidst all this, I got a phone call the other day from a headhunter. He wanted me to interview for a job that almost sounded perfect-- a great fit for my background, a better title, and potentially a raise of about 50% from what I make now. I know headhunters tend to dangle big salaries in front of people, but I knew this could still be a chance to take a good step up the salary ladder, and making more money would help take some of the sting out of all my investment losses. But there were a few reasons I decided not to pursue the job, and one of them was that I just didn't want to risk making a move right now. My current employer seems to appreciate me, and I've already survived some downsizing here. That, to me, seemed safer than going to a new company full of unknowns. This may be a cowardly and short-sighted decision, but it was all I could stomach right now. What would you have done?

Live-In Maid

This weekend I watched a lovely little movie from Argentina, called Live-In Maid. It takes place during the 1990s financial crisis, as Beba, an upper-middle-class woman struggles to find the money to pay her maid Dora, who has lived with her for 28 years.
Obviously money is an important part of the relationship between the two women, as one is an employee of the other. But it's more complicated than that-- in some ways, they are like family.

I found the circumstances of the movie quite resonant given the current economic situation in the US. In the movie, money is tight and lots of people are trying to find work. Beba tries to sell upscale cosmetics, but has very little success. She's left having to pawn her belongings to try to pay Dora the several months' worth of wages she owes her. Beba is embarrassed and ashamed, and can't seem to get her head around the idea of cutting her expenses, by moving to a smaller apartment or not having her hair done.

Meanwhile, Dora owns a little house outside the city, which she is slowly improving with the money she earns as a maid. Even if Beba can't pay her, we know there are still other wealthy people who will hire her. Dora is calm and in control, while Beba is getting desperate because of the disparity between her income and the lifestyle she thinks she has to have.

This is not a simplistic story of a haughty rich lady and her long-suffering maid-- it's far more nuanced, and somehow it really rings true. I was also surprised to learn that the woman who played the maid was actually a first-time actress who had actually worked as a housekeeper in the past-- her performance certainly measured up to that of the woman who plays Beba, who is one of Argentina's most famous actresses. All in all, I definitely recommend the film!

You can read the New York Times review of the film here, and it's available on Netflix.

Wallet Hacks

If you've got any cash left in this lousy economy, here are some good ways to carry it around!

16 Wonderful Wallet Hacks at Cool Materials

My favorite is the wallet made out of money:

Executives Starting to Get the Message

From yesterday's NY Times business section:

CEO of Hewlett Packard cuts his own salary 20%

CEO of G. E. declines his 2008 bonus

Soon we will have wealthy masters of the universe falling all over themselves trying to outdo each other with their pay cuts!

Hot Jobs in a Cool Economy?

The latest issue of Women's Health has an article called The Hottest Jobs Right Now, listing 5 jobs that they say "could lead to a richer, more rewarding future." Here's their list, along with their estimates of pay ranges according to Bureau of Labor Statistics data:

• Eco Interior Designer: "helping home remodelers go green." Pay: $50,000-$82,000
• Social-Media Marketer: helping companies harness the marketing power of sites like YouTube, Facebook and Twitter. Pay: $113,000-$144,000
• Financial Advisor: considered one of the 10 fastest-growing careers. Pay: $82,000-$137,000
• Natural-Foods Chef: helping busy people eat healthily or tailor their diet to allergies, weight loss, etc. Pay: $41,000-$65,000
• Wellness Manager: Working with corporations who want to reduce their long-term costs by focusing on preventive care for employees. Pay: $95,000-$125,000

A sidebar article also lists these "low-stress" jobs for people who are looking for quality of life rather than a big paycheck:

• Archivist
• Museum Curator
• Credit Analyst
• Nursery and Greenhouse Manager
• Set Designer
• Soil and Water Conservationist

I'm not sure I can take all the salary estimates too seriously, and obviously most of these aren't jobs you can just waltz right into without some experience and training. Though I bet a lot of people will read this and say WHOOHOO, I could be a social media marketer!

Are there any readers out there who do any of these jobs? What do you think?

Of Interest from The New Yorker

There have been some great money-related articles in The New Yorker lately.

The Feb. 2 issue was jam-packed:

Alex Ross on affordable concertgoing in New York: Cheap Seats

John Lanchester reviews the book Lords of Finance, in Heroes and Zeroes: When central bankers rescued, then ruined, the world.

The Rationalist, Laura Secor's profile of an Iranian free-market economist. I found the cause-and-effect analysis of various policies fascinating, how politics can lead to such wild swings in a country's economy.

And in the Feb. 9 16 issue, The Ponzi State. George Packer's article on Florida's real estate boom and bust is a must-read. The most poignant part for me was about a man named Dan Hartzell, who described himself as "a blue-collar type guy." He was recently laid off and has been desperately looking for work ever since, with no luck.

The Hartzells didn't take out a subprime mortgage. They hadn't lived beyond their means. After Dan lost his job, they stopped renting DVDs and buying toys.... They felt lucky to have avoided eviction, but now they were facing the real possibility of homelessness....
Dan knew that his plight was the result of rising unemployment in a bad economy that was shedding the few remaining manufacturing jobs... and yet, in pondering the causes of his trouble, Dan couldn't avoid the feeling that the world had singled him out for some terrible payback, that it must have been his fault, that the failure was his alone and he had no right to anyone else's help. It occurred to me that this was an attitude that no senior figure on Wall Street had adopted.

And this guy gets at what I always think about when I hear people saying that it's okay for us to send manufacturing jobs overseas because we're becoming a service economy or whatever-- as if it's all going to be okay because everyone will just be re-trained to work in retail or do something with a computer. But the reality is that we need blue-collar jobs, not just white-collar jobs. Some people are better suited to that kind of work, some people want to do that kind of work, and there shouldn't be any judgment placed on it, as if it's only good enough for those other people in some third world country. Dan Hartzell isn't ashamed of not being "the behind-the-counter-take-your-money-can-I-help-you-find-your-dress-size type." So why can't this country find a way to employ more people like that with dignity, with a decent wage, and without looking for them to take the first pay or benefit cuts when things go wrong?

Anyway, lots of good reading in these articles... you have to be a registered user to get the full text of a couple of them, but enjoy!

Nuala O'Faolain on Money

I recently started reading Are You Somebody? by Nuala O'Faolain, a fascinating memoir that was recently reissued after the author's death. It's quite an intense and candid book, and I'm really enjoying it. And of course, I couldn't help noting a few passages where the author talks about money.

On her first job after leaving high school at the age of 17:

I had a job...working as a clerk in the hire-purchase office of a furniture shop in Grafton Street. Hire-purchase was for the very poor, then. I saw... how bitter it was for them to be still paying out for things they'd got long ago. Money was dominating me, too. I was living at home but I was giving up half my wages to Mammy. From leaving school on, how to earn enough money to keep myself was my biggest single problem for years and years.

Somehow I don't think Americans today have that same sense of shame about having things now and paying for them later.

Later she talks about an interview she gave in which she described herself and other students at University College Dublin as "poor." A reviewer takes her to task, noting that her father was a well-known journalist and saying "nobody who went to UCD in those bleak years [the late 1950s] was poor. They were only playing at poverty." Nuala admits that this was, in a way, true, as she wasn't as desperate as many unemployed Irish people were at the time, when things were so bad emigration could be the only option. "But," she says, "I was hurt, all the same." Her father seems to have squandered what money he did have, and her mother seems to have drunk away the rest during her twice-daily sessions at the local pub. Nuala and her eight siblings were all neglected, living in a filthy house where they had only scraps of sheets to tuck under their chins as they slept under piles of old coats.
Children don't necessarily benefit from their parents' financial resources-- but sometimes it isn't about the money anyway. Nuala tells the story of another Dublin journalist her age who was truly poor:

His mother was a maid in a hotel. The children would wait in the alleyway at the back of the hotel at night until she found out what bedroom was empty and smuggled them in. I envied him. I envy him that his mother took such care of them.

It makes me think of my own niece and nephew, and hope that the things they'll remember about their childhood will be more about the love and attention they got from their family than all the toys they had...

Where's the Pot of Gold?

Yesterday as I walked to the subway, I saw a rainbow-- a fairly unusual sight for Brooklyn in February! Strangely enough, the end of the rainbow looked like it was pointing to lower Manhattan...

Goodbye, Dubai!

Looking for things to make you feel better? How about "at least I don't work in Dubai!"

From the New York Times:

Laid-off Foreigners Flee as Dubai Spirals Down

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai — once hailed as the economic superpower of the Middle East — looking like a ghost town.

Wall Street Was Giving Us the Finger

Somehow, I don't ever seem to have posted about the magazine Trader Monthly. It came to my attention a couple of years ago when a friend of mine had to do some work for them, and I was kind of amazed (but kind of not) that such a magazine existed: basically, the whole point of this magazine was to offer young obnoxious Wall Street guys expensive things to spend their money on-- the cover would always feature a Ferrari, or a yacht, or an expensive watch, etc... oh yeah, and some babe fondling said expensive object and/or Mr. Big-Swinging-Bonus himself.


The magazine was folded last week-- not surprising in this economy, but perhaps not because of this economy. In today's Wall Street Journal, Thomas Frank offers this fond appreciation of the dearly departed:

Wall Street Mocked American Values

Just a few years ago... the bonus cognoscenti at Trader Monthly depicted [Former Merrill Lynch CEO John] Thain as something of a piker. In an article that began with the sentence, "What, did somebody forget a zero?" they sneered at Mr. Thain's "reported compensation," which they claimed was $6 million for 2006, back when he was CEO of the New York Stock Exchange.

What was $6 million in those days? Remember, 2006 was the year of "the Biggest Bulge Ever," as the magazine tastefully put it, when "the bonus pool increased to a size almost beyond comprehension." That was the year that Goldman Sachs famously distributed $16.5 billion to its employees, and if you were one of the lucky ones, Trader Monthly -- "See It, Make It, Spend It," was its slogan -- stood ready to help you figure out how to blow your share properly, conspicuously, flamboyantly.

Oh, there were cars: Lamborghinis, Bentleys, Ferraris, Maseratis, sometimes described in the magazine's characteristic tone of flippant indulgence. There were airplanes, reviewed and rated in a column specifically dedicated to that purpose.

There were Scotches, including, in the "Bonus Guide" for 2008, a $20,000 bottle of Johnnie Walker. There were watches, mechanical ones of course, and among the most desirable were the ones with transparent faces, presumably so the little gears were visible and everyone knew the timepiece was for real.

Reading through back issues of the magazine, which was published in Europe with distribution help from The Wall Street Journal Europe, one does not get the sense that its trader readers aspired to live this way because they were jolly bon vivants. Quite the opposite. At one point in its intermittent pursuit of the best possible record player, for example, Trader Monthly described what it claimed to be a $300,000 turntable as "a huge middle finger to everyone who enters your home."

If you didn't understand why someone would want to greet their guests in such a way -- and as a nation we certainly didn't -- then you didn't understand what it meant to be a trader.

I can understand that there might be some exaggeration going on, but there is just something wrong in a culture that celebrates being an a--hole.

The magazine's panting worship of the truculent personality culminated in a bizarre spectacle it arranged in November of 2007: trader boxing. Before an audience chewing steak and guzzling luxury vodka, the furious fists of bond traders connected with the jaws of corporate vice presidents.

And to those who wondered why the nation should heap up its wealth at the feet of such pugnacious vulgarians, the magazine gave the usual answer: Traders prospered because they delivered.

"The rewards have become so astronomical that the competition for coveted entry-level trading positions has become extremely fierce," mused the magazine's founder in the gilded year 2007. "Or is it the other way around -- the talent entering the market is so substantial that it has pushed the returns and, therefore, the rewards to levels once considered unthinkable?"

Although he didn't mention it, there was also a third possibility: that much of the financial engineering, the fancy new derivatives and balance-sheet legerdemain, was part of a bubble that would one day burst. That many of these hustlers, gamblers and pugilists were helping to misallocate capital on a fantastic scale. That with or without the aid of a $300,000 stereo component, they were telling America just what they thought of it.

Well, I guess now a lot of Americans are giving them the finger right back! Not that any of these guys will probably care...

Trying to Be Middle-Class on $500k

Okay, yesterday I couldn't face commenting on recent news stories, but I have to tackle this one:
You Try to Live on 500K in This Town

Like most readers, I can't dredge up much sympathy for anyone who thinks it's tough to get by on $500k a year, even here in NYC. But hidden within the "oh it's so hard to be rich" crap like how to budget for summers in the Hamptons and a full-time nanny lies this valid point:

[In NYC, it] takes $123,322 to enjoy the same middle-class life as someone earning $50,000 in Houston...

Let's say you have a family of 4, and you want a 3-bedroom home, and one car. You want to send your kids to a school of decent quality. And maybe you'd like the kids to play a sport after school, and you want to take the whole family to the movies once in a while. For now, just forget all the extras like vacations and keeping up with the Joneses when it comes to designer clothes and spa treatments. If you want to live in Manhattan, or even many parts of the outer boroughs and New Jersey, you absolutely need a six-figure income to afford these things-- things which people in other areas might consider the bare minimum of a middle-class life.

I did a quick search for 3-bedroom apartments for rent in Manhattan, with 2 bathrooms and 1500-2000 square feet. Those currently listed on the NY Times website range from $3,000-$20,000 a month, with most probably falling in the $8-10k range. You'd have to pay around that much in monthly costs to buy a place too. If you want to keep housing at 30% of your income, you'd have to be making over $300k a year. (Even in Manhattan, the median income is only around $64k, and the average is about $121k.)

How about the car? Forget the cost of buying it and insurance and maintenance. Let's just focus on one thing: where are you going to put it? If you want your own driveway, expect to pay more than the housing costs above. That leaves the street or a garage. If you want to drive around in circles and have to move your car twice a week even if you don't need to use it, and risk damage and break-ins, go ahead and park for free on the street. A garage can easily cost $300 a month and up.

School: New York does have some good public schools, but you can't take it for granted that you'll be able to send your kids to one of them, so many middle-class families who want their kids to get into selective colleges opt for private schools. Some Catholic schools may only charge a few thousand a year, but some charge as much as $25,000 a year, and other private schools can be over $30,000 a year. See here for an evaluation of NYC's public schools-- only about a third get an "A" for the percentage of students passing state tests. I don't have any stats for what these schools offer in terms of sports and activities, but I'm sure budgets will be cut in the coming years given our economic situation.

As for the movies, adult tickets are $12.50 and children are $9.00 these days (over 30% more than ticket prices I found for Houston). Add some popcorn and soda and you're easily looking at $75 for a night out.

Many people will read this and say "well, it's crazy for a family of 4 to try to live in NYC," and however sad that might be, they are probably right. But some people need to work in NYC-- my career options would be severely limited in other cities, because most of the publishing industry is based here. If I had kids, I'd definitely have to move further out of the city, but then I'd incur costs of $200-300 a month for a commuter train pass.

But it wasn't always so-- New York was never cheap, but it didn't used to be this out of whack in relation to middle-class incomes. Those sky-high Wall Street bonuses have been part of the reason-- the tax windfall may have helped fill the city's coffers, but I think NYC is a perfect example of why rising income inequality is a bad thing. I'm not sure salary caps are the best way to fix it, but it will be interesting to see how this might change over the next few years.

Blasts from the Past

Three years ago today, I was writing about retirement books.
Two years ago today, I linked the the Anonymous Lawyer's take on salaries.
One year ago today, I didn't post, but the next time I did it was about proximity to wealth.

Today, I could be linking to any of a gazillion stories in the weekend papers that had to do with money, living on less, economic crisis, etc etc etc. It's too much! I can't take it any more!

Dieting For Dollars

Financial incentives may be an effective way to help people lose weight, according to this New York Times article: Dieting? Put Your Money Where Your Fat Is.

Most diet bettors agreed that while losing weight was the ultimate goal, winning the bet — and pocketing the winnings — soon became the main reason they stuck to their diets.

“I wanted to win, and I blew everyone away,” said Christopher Fallon, 36, a medical sales representative from West Orange, N.J. Mr. Fallon participated in a three-month diet bet with nine other colleagues, everyone contributing $100 to a winner-take-all pool. At a sales meeting a few weeks before the end of the bet, Mr. Fallon’s fellow bettors realized that he was way ahead.

“When I saw Chris at the gym at 6 a.m. looking skeletal, I knew it was over for me,” said one colleague, Carolyn Kramaritsch.

Mr. Fallon admitted that he enjoyed vanquishing his peers even more than losing the pounds. “I didn’t even need to lose much weight,” he said, “but when I saw everyone else, I thought, ‘I just won $900!’ ”

Sounds like a win-win situation... unless people start cheating with dangerous weight-loss drugs, just so they'll get the money!

But it seems to me that what would REALLY work well is exactly the opposite: let's say you could magically lose a pound for every $1,000 you put in a savings account. Something tells me a lot of Americans would suddenly have much bigger nest eggs!

Women Get Taken to the Cleaners

Remember this post? Price Discrimination at Dry Cleaners

So I hand the girl my two shirts and she says "are these man shirts or lady?" I look at her blankly and she says, "oh, these are ladies blouse, so dryclean." I say no, that I don't want them drycleaned, just laundered, no starch. She says they only do that for men's shirts, and that women's shirts have to be drycleaned, at a cost of $2.50 vs. $1.50 each. I argue that that is ridiculous, as all collared cotton shirts are the same and they should charge based on the service rendered, not what gender wears the shirts. She doesn't budge, so I told her I would be taking all my laundry and drycleaning business elsewhere.

Well, I'm not the only one. Check out this article from today's New York Times.

For women across New York City and beyond, it basically amounts to being taken to the cleaners. Women’s shirts often cost much more to launder than men’s, even if they are smaller and made of the same cloth.

Many women grudgingly accept the higher prices, much as they accept the perennial lack of pockets in their pants and the lengthier lines outside their restrooms. But not Janet Floyd, a 44-year-old mother, community volunteer and newly minted missionary for gender equality in the wash place.

Ms. Floyd’s crusade began in November, when, she said, she and her husband brought their nearly identical blue Brooks Brothers oxfords to be laundered at Best Cleaners in Chelsea. The shirts came back clean, but Ms. Floyd discovered that hers cost $8.75, his $7.

And yes, that is where I totally choked. $8.75 vs. $7? For one shirt? My current price for drycleaning a shirt may be a bit higher than the $2.50 price I paid in April 2007, but I think it's still $3 or less. Janet Floyd pays extra to have both her and her husband's shirts hand-ironed, which make the price discrepancy even more outrageous-- the standard justification for charging more for women's shirts is that they do not fit on the pressing machines used for larger men's shirts. Anyway, I feel Ms. Floyd's pain but I can't imagine paying $7 and up to have a shirt cleaned by any method!

Is this a problem particular to New York? How much do places in other areas charge to launder shirts?

Do You Have a Crisis Plan?

What would you do if you lost your job or had some other sort of financial crisis? What would be the first thing you'd give up?

I was thinking about this the other day when Sweetie and I were joking about whether we'd move in together if either of us lost our jobs. I have savings I could live on for a while if I lost my job, but I don't think I'd want to count on them. Since I live in a 2-bedroom apartment by myself, I think the first thing I might do would be to get a roommate-- I could probably get $800-900 a month, or maybe even more. That would make a big dent in my expenses, and though it would be a big lifestyle shift, I could probably handle it as I'm spending less time at home these days anyway. If things came to the point where I really did decide to move in with Sweetie, then I'd consider selling some furniture and putting a few things in storage in order to make it work.
As an aside here, I don't think financial necessity is a good reason to move in with someone, but I'm sure it is often a big part of the decision!

What else would I do? I pre-pay my gym membership for a year, and though I really wouldn't want to give it up, I'd consider suspending the membership or letting it expire. I'd definitely cut back on restaurant meals and takeout and be a lot more careful with my food shopping. I might give up my land line and just use my cell phone. I'd give up my French lessons. I'd be careful about all other incidental spending, such as clothing, magazines, etc. But all of that would be far less significant than changing my housing situation.

Sweetie said "ugh, a roommate? That wouldn't be much fun," when we were talking about this. My response: "well of course it's not much fun! It's a CRISIS plan, and it's supposed to just be temporary." I'm lucky to live in a place where I could rent out an extra room, and lucky to have someone who could handle me moving in-- not everyone has this kind of flexibility. But in other areas, I feel like my expenses are relatively low and I don't have much room to cut back-- I can't have a lower cable TV bill than zero, for instance.

How about you? Do you have options to make major changes in your lifestyle if circumstances demand it?

Financial Goals for 2009

I've been trying to come up with some goals and resolutions for 2009 and I'm having a hard time! Everything is so uncertain right now, it seems useless to set a net worth goal. I'm trying to just focus on little things I can control, so here are a few ideas:

• Get off all those stupid email lists

I've been aggressively tackling this already and it makes me feel good! I have drastically cut down the mailing lists I'm on. This only indirectly affects my finances-- sometimes I'd open one of those emails and click through to an online retailer and buy something, and now I'll be less likely to do that. Also, it was just a time-waster, and time is money!

• Cut down on dining expenses

After looking at all my food spending details, I'd like to just scale back somewhat on my lunches, dinners, and liquor, for health and financial reasons. I think a good goal would be to cut those expenses by at least 10%.

• Increase savings

This should be easy to do, as I have no intention of spending thousands of dollars on travel this year, and my other expenses tend to be fairly consistent.

• Pay extra towards mortgage

I'd like to make at least an extra payment or two, going towards the principal of my mortgage. I view this a nice conservative investment. I'm not sure refinancing would be worthwhile for me right now, as I already have a decent rate, but I will keep an eye on interest rates to see if that changes.

• Rebalance my investment portfolio

My current portfolio balance isn't all that out of whack with what it should be for a person of my age, but there are a few mutual funds in there that I think are dogs. I'm in the hole right now no matter what, and the question is whether I have the best investments to help me climb out whenever the market recovers.

• Increase my income?

I already know I won't be getting a raise this year, and if I get a bonus, I'm sure it will be small. I also don't think the current climate is one in which I want to be jumping from one company to another. I don't think there is any opportunity for a promotion at my current company right now. So that leaves other sources of income. I could try to increase the advertising on this site (and drop the pledge to donate all proceeds to charity). I also have an idea for another website I could start, but I can't imagine where I'd find the time to do it! Taking on a 2nd job also doesn't seem feasible. (Of course I could do it in an emergency, but right now I'm prioritizing my sanity!) So all in all, I don't think I'll focus too much on this goal.

• Roth IRA contribution

I actually knocked this one off my list the other day. I made my $5,000 contribution for 2008 and put it in a Vanguard bond fund. I'm toying with whether to also make my 2009 contribution now-- I will probably put off that decision until after I find out about my bonus, as I don't want to tie up too much cash. Gotta have some liquid funds in case of emergency, now more than ever!

What are your goals for 2009?

The Comeback Calculator

I just noticed this on the NY Times website: an interactive graphic where you can calculate how long it will take your portfolio to rebound to its peak level before the crash. I tried running the numbers for my 401k, which I think peaked at about $200k, maybe a bit higher. For me to reattain that level in 2 years, the market would have to have annual returns of 20%! Not bloody likely!


More realistic, though still optimistic at this point, would be annual returns of 5%-- that means it would take 4 years to regain my former peak.


It's also interesting to play with small changes in the annual rate of return to see how it affects the account balance after 30 years-- at a return of 4%, I'd have a little over $1 million; at a return of 6%, I'd have over $2 million. And in my bizarro-world scenario of 20% annual returns, I'd have about $140 million. Leaving aside that craziness, it's amazing that seemingly small differences in market returns could make such a dramatic difference in my retirement lifestyle!

Of course, this is just my 401k, where my contributions are limited. I'm also not taking any extra employer contributions into account. But still, it's scary. When the market drops so rapidly and becomes so volatile, it's tempting to think it could rebound as dramatically and quickly... but that just isn't the way it happens...