Retirement’s ‘Big Three’ — Pensions, Savings, Social Security — Are All in Huge Trouble

via marketwatch:

You know the old adage that “a rising tide lifts all boats?” What if you don’t own a boat in the first place? That rising tide won’t do much for you, will it?

And so it is with this historic bull market, which, if it continues, will enter its 11th year—11 years!—come March. Vast amounts of wealth has been created, lifting many boats; some folks have gotten even bigger boats.

But most Americans—perhaps you—haven’t benefited much. 54% of middle-income households (defined as income ranging from $48,000 to $95,000) don’t have enough saved to maintain a decent retirement. That’s the same percentage as in 2010, when the stock run-up was in its early stages, according to a study by the Center for Retirement Research at Boston College.

What happened? Why have so many Americans been left out? The study blames the usual culprits: high debt, surging and often unforeseen health care costs, and investment mistakes.

Let’s focus on the last issue, investment mistakes. Folks seem to forget that even with the market’s incredible run since 2009, there were two devastating crashes within the space of a decade: 2000 to 2002, when the S&P 500 SPX, -0.14%  fell 49% over 30 months and an even bigger disaster between 2007-09, when the S&P 500 plunged a staggering 56% in just 17 months.

Some investors got burned in the first crash (AOL, Webvan and, anyone?); others, who loaded up on things like housing and mortgage lenders, got nailed by the second one. Some poor souls, no doubt, were hit twice.

The net effect of this is that millions of retail investors, spooked by the market’s one-two punch, have stayed away—thus missing out on what may turn out to be a once-in-a-lifetime gain. Hindsight being 20/20, in retrospect, had investors simply closed their eyes and hung on during the carnage of a decade ago—turned off CNBC, stop opening their 401(k) statements, not allowing their emotions to get the best of them—they would have more than recovered.