Friday, September 04, 2009

Bursting of a Wealth Bubble

The article Rise of the Super-Rich Hits a Sobering Wall offers an interesting hypothesis that the period of 1987 to 2007 was the creation of a Wealth Bubble, which began bursting in late 2007. Until then, money invested in the stock market and real estate on average provide great returns. For example, in the past it was very common to advocate investing in index funds as a path to become wealthy.

Many baby boomers and retirees, including me, benefited from this wealth bubble over the past two decades, as retirement accounts and home values rose. Unfortunately, many of the same people have seen significant declines in their net worth with the recent bubble burst.

How fast people will reaccumulate wealth is not evident yet. At this time, many experts believe that recovery from this bubble will be very slow. However, there are some that believe another bubble will occur, due to low interest rates, and another group believe a major crash is imminent.

Whatever scenario plays out, it doesn't appear growing one's wealth will be as "easy" or "certain" as it was in the past two decades. This may become an important issue for those that have retired or are considering retirement in the next few years.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC


Anonymous said...

I placed a link to your blog in the Early Retirement Forum

Thanks for the wonderful posts. It was encouraging to follow your progress through the last 12 difficult months. I retired in my 40s last May, and like you, am contemplating going back to work to repair my portfolio.

If you're not aware of the early retirement forum, please give it a look. There are a lot of people like you & me there.

Super Saver said...

Thanks for sharing my blog post in the Early Retirement Forum. I wasn't aware of the Forum before and will definitely check out the content.

Also, congratulations on your early retirement. Agree, the last year has been very challenging. Hopefully, the next year will be better and we can all continue to keep our early retirement successful :-)