COVID-19 killed the retirement market

Right around this time last year, the market was hitting the bottom of a free fall, thanks to the spread of COVID-19, and the world shutting down to stop it. Things looked bleak, and if you had your retirement invested in index funds that tracked the S&P 500, it may have felt like the bottom dropped out of your future.

Between Feb 14, 2020, and March 20, 2020, the S&P 500 dropped from 3,380 to 2,304. If you had a 401k worth $500,000 invested in S&P 500 index funds in the middle of February, it was worth $340,828 by the end of March. You would have lost almost $160,000 in five weeks.

It would have been terrifying. For many people, it was terrifying. They panicked. They sold their positions. They made an enormous mistake.

The thing we always need to remember about the market is that it’s resilient. Funds like the S&P 500 are built to mirror the economy, and the economy was not collapsing. The country was not shutting down for good. Given enough time, things would stabilize, and then once again, grow. We saw that throughout the rest of 2020.

The only people who were hurt by the COVID-19 slide last spring, were those who cashed out their positions at the bottom. As I write this, in the middle of March 2021, the S&P 500 is at 3,943, almost 600 points higher than before the slide last February. Today, that $500,000 would be worth $583,284 if it had been left alone. Not a bad return, given the year we all had.

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