How the Housing Crash Hurts Your Retirement by Walter Updegrade from CNN.com highlights problems scenarios caused by the housing bubble which had a negative impact for some retirement plans when housing crashed. The problem scenarios identified by the article were:
In my experience, similar scenarios have occurred with other asset bubble and ensuing crashes, such as tech stocks in 2000 to 2002 and gold in the late seventies.
Our goal for retirement savings is to preserve wealth, and therefore, we tend to be conservative in our investments. For those areas which are potentially in a bubble, our solution is to only invest a small portion of our portfolio, less than 5% in most cases. While I may not gain as much as others, I also won't lose as much when there is a crash.
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This is not financial advice. Please consult a professional advisor.
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