By the end of March 2009, the market bottom, you would have contributed $1,900. Your value would have been $600 less only $1,300, reflective of the severe market decline suffered during the crisis.
For some, that would have been enough to stop participating in their retirement plans altogether. Many learned to distrust the market, wondering why they even bothered to try to save.
But, the truth of the matter is that investors had choices. What they did next determined success or failure.
If you bailed out and put your $1,300 in the bank, how would you have made out? From March of 2009 through April of 2014, you would have been about even, since interest rates were almost nonexistent.
What if you stopped your monthly contributions, but held on to your S&P 500 Index fund?
By the end of April 2014, you would have had about $3,200 after contributing your original $1,900, for an average annual return of 9.2 percent.
You could have done even better by continuing your $100 monthly investments after March 2009.
By April 30, 2014, your monthly contributions would have totaled $8,000, and your balance would have been about $13,000, for an annual return of 14.6 percent. If instead, you had put the monthly $100 ($8,000) in "the bank," you would have a fraction above $8,000 today.
Some would say, "Who could have known in March of 2009 that the stock market would recover?" After all, there could not have been a more dismal time in recent financial history.
While it's never a good idea to try to predict the future based on the past, students of market history can gain insights to guide their investment decisions.
When you are young and contributing to your retirement plan at work or saving on your own through an IRA, monthly investing especially during down market periods works in your favor, but you can't sell at the bottom.
Market downturns can be beneficial to anyone with a long-term investment horizon, especially when investing small amounts of money over time.
That said, when you are older, having accumulated significant assets for your retirement over a lifelong career, you may not find the ups and downs of the stock market invigorating. When approaching retirement, caution is in order.
On that point, a "60 Minutes" program on 401(k)s that ran at the height of the financial crisis was rebroadcast recently.
The moderator asked, "What kind of a retirement plan allows millions of people to lose 30 to 50 percent of their life savings just as they near retirement?"
A commentator said: "The fact is that the typical 401(k) investor is a financial novice. They don't know a stock from a bond. And we give 'em a list of 20 or 30 mutual funds with really, really powerful names, you know, they sound like, 'Gee, that's where I want to have my money.'"
Some people are novices indeed. But, there is no reason for that to be the case.
If you are a regular reader of my column and my books, you know that I believe in studying, researching, learning and studying some more.
We need to save and invest wisely for a very simple reason. In today's world, we are living longer, well beyond age 65.
Age 65 was set as retirement age for Social Security based on the first government retirement introduced in Germany by Otto von Bismarck in 1889. At the time, the retirement age in Germany was age 70, when few lived long enough to claim benefits for any length of time. In 1916, Germany reduced the retirement age to 65. That was almost a century ago, and a lot has changed since.
We all have to recognize that it pays to build a solid foundation of knowledge before making investment decisions. What can be more important than learning the skills and the tools that young adults can put to use today to become financially independent tomorrow?
Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author, welcomes your questions/ comments (firstname.lastname@example.org).