What does "millions lost their savings" mean?

3

35nothing

Dryer sheet wannabe
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I have never come across a depression or recession in my lifetime( since I am not an American citizen). What does the term in the title mean?? I understand the value of their investments would have come down ( 401, Equity etc).

But say I have a 100k in a normal savings account, do I risk losing that amount in case of a market crash. So if my bank or credit union makes some bad investments, do I risk losing this amount also??
 
Not sure what you are referring to with your headline. Maybe a reference to 401K balances?

As far as normal savings account in the US up to $250,000 per account is insured by the Federal Deposit Insurance Corp.
 
There are a few ways to "lose savings".

One is when a company fails, such as Enron, and the stock truly is worthless or the bonds (money they borrowed and were to pay back on a schedule) have zero value. This is relatively rare.

Another is when a company's stock value drops significantly in a recession. The good ones will eventually rebound (and maybe you should buy more when the values are low). The badly-run ones may never recover. Investors can make it worse by selling at the bottom of the market, either out of panic or because they need the money to live on. I think this is most of the "millions losing their savings". The last recession was awful for me- temporarily. I was confident that most of my investments were high quality, did NOT sell them, and continued to add new money and buy more (this was pre-retirement). Eventually my portfolio recovered.

In the US, most savings accounts are protected by the FDIC (Federal Depositors' Insurance Corporation) so you'd be safe, and there are laws that regulate how aggressively banks can invest.
 
During the Great Depression, more than 9000 banks failed before the FDIC guaranteeing deposits (up to limit) was created.

"Bank runs" occurred when people suspected a bank was going to go under and people rushed to the bank to withdraw their savings.

There is a new backdoor risk of a bank "bail-in" where a portion of your deposits in the failed bank are converted into equity. Technically bank account holders are creditors of the bank... creditors get wiped out when the institutions they loaned money to can't pay it back.
 
The answer is it "depends." A savings account in the US is insured so no you would not lose it. If you had the money in an investment that went to zero, yes its gone. The headline is just that, a headline. I see articles where people say they lost everything in 2008. Well probably because they sold at the bottom.
 
I read a recent Yahoo! Finance article that stated something like the headline of the post. It inferred that those who had their retirement accounts invested in the markets around 2008 lost their life savings. For many, they lost up to half of their life savings, as they panicked and sold during a down/declining market. There were also those who were in retirement, and had to keep withdrawing money to live on, making losses permanent. Of course, those who held the course, not selling, and living off of bucket approach $, probalby ended up with 2-3X the assets today as in 2008.

I do have one friend who lost virtually his entire retirement savings (some $90K), after the electric company he had worked for was bought by Enron, his stock was converted to Enron stock, and then it tanked. Not millions, but it was virtually all that he had, except for some equity in a condo. He was older, and in poor health, so it hit him really hard. Not being prepared...he liked to take cruises on the Queen Elizabeth II and ride the Concorde, while his savings suffered.
 
A friend told me after the dotcom bubble burst in 2000/2001 that her husband the doctor had been buying on margin. She didn't know and they DID lose half their retirement savings as they sold the stock at extremely low valuations to pay back the margin loans. They were in their 40s.

In our marriage I was the one who made investment decisions but my husband ALWAYS knew approximately what we had and how it was invested. He was my common-sense test if I wanted to buy something exotic. If he didn't like the idea I'd buy a smaller stake or not buy at all. He didn't need (or want) to know the details but I wanted to make sure he understood the risks.
 
I wonder if it might also refer to the millions of people who lost their homes to foreclosures, thereby losing their 'savings' (= the funds they had already invested in their homes while still holding a mortgage, which they might not have been able to keep paying if they lost their jobs).

omni
 
Good answers in this thread. Folk here are often keen to help out, which is great. However, I'm curious about the following statement -

35nothing said:
I have never come across a depression or recession in my lifetime( since I am not an American citizen).
Click to expand...

Are you living in a country other than the US, or are you living in the US, but not a citizen? Recessions and depressions are not certainly not specific to the US. I'm wondering where you live, or how old you are, that you have not lived through a recession or depression. Perhaps you're young, and when the last one happened, it didn't affect you directly? Or perhaps you're living in a less developed country where hardship is a given. If you are living under a repressive regime, the the boom and bust cycles, if any, are probably manufactured by the regime, as opposed to being a more natural result of market cycles.

On the other hand, if you were living under a repressive regime, you probably wouldn't be posting here!

It sure would be nice to have a little more information.
 
Major Tom said:
Good answers in this thread. Folk here are often keen to help out, which is great. However, I'm curious about the following statement -



Are you living in a country other than the US, or are you living in the US, but not a citizen? Recessions and depressions are not certainly not specific to the US. I'm wondering where you live, or how old you are, that you have not lived through a recession or depression. Perhaps you're young, and when the last one happened, it didn't affect you directly? Or perhaps you're living in a less developed country where hardship is a given. If you are living under a repressive regime, the the boom and bust cycles, if any, are probably manufactured by the regime, as opposed to being a more natural result of market cycles.

On the other hand, if you were living under a repressive regime, you probably wouldn't be posting here!

It sure would be nice to have a little more information.
Click to expand...
According to his profile he is 35 and lives in Texas.
 
What does "millions lost their savings" mean?

It means nothing. I know tons of people who lost their investments but not one who lost their savings since the depression era.
Investments are not savings and savings are not investments. Words have meanings.
 
Spock said:
During the Great Depression, more than 9000 banks failed before the FDIC guaranteeing deposits (up to limit) was created.
Click to expand...

My great grandmother dropped dead right there in the hallway in October 1929 when the old man came home and told her the banks were closed; 'the money's gone'.

IFAIC, that's the last time anyone "lost their savings" to any great extent; Enron being one of the exceptions.

One can 'lose' a lot in a market crash/recession but unless you sold (as my smarter-than-you neighbor did on the last week of Feb 2009) you don't lose anything more than a paper loss.

Now, you say that you never experienced a recession. There was one in 2008; worst since 1929 and I'm assuming you're older than 10 years old. Americans and non-Americans alike experienced the same losses.

Having said that, if your money is in a US bank it is covered by insurance which didn't exist in 1929.
 
Last edited:
REWahoo said:
The govt would keep "printing" money to pay them all off. And if that didn't work the masses would riot and go after everyone who had gold.
Click to expand...



So your saying there’s nothing to worry about... stay the course, keep your heads in the sand and I’ll do the worrying?... I got it
 
Spock said:
During the Great Depression, more than 9000 banks failed before the FDIC guaranteeing deposits (up to limit) was created.

"Bank runs" occurred when people suspected a bank was going to go under and people rushed to the bank to withdraw their savings.

There is a new backdoor risk of a bank "bail-in" where a portion of your deposits in the failed bank are converted into equity. Technically bank account holders are creditors of the bank... creditors get wiped out when the institutions they loaned money to can't pay it back.
Click to expand...

Spock pretty much hit the mark. Way back then, if your bank failed, your money often went with it. Sort of like loaning money to somebody who goes bankrupt. Today with FDIC insurance up to $250,000, one has to spread the money around a bit, but losing it all in a real bank (not a MM mutual fund for example) would not happen.

In modern times, many people will talk about how they 'lost it all' in the crash of 2008. Well, that is not true unless one had very poor stocks, but it makes a very good headline. Most of them panicked, sold near the bottom, and then watched the market go up, Up and UP for almost 10 years while they had locked in their loss. Not so good.

Money in a Federally insured account is not the same as money in the stock or bond market.
 
Chuckanut said:
Spock pretty much hit the mark. Way back then, if your bank failed, your money often went with it. Sort of like loaning money to somebody who goes bankrupt. Today with FDIC insurance up to $250,000, one has to spread the money around a bit, but losing it all in a real bank (not a MM mutual fund for example) would not happen.

In modern times, many people will talk about how they 'lost it all' in the crash of 2008. Well, that is not true unless one had very poor stocks, but it makes a very good headline. Most of them panicked, sold near the bottom, and then watched the market go up, Up and UP for almost 10 years while they had locked in their loss. Not so good.

Money in a Federally insured account is not the same as money in the stock or bond market.
Click to expand...

No, you can use a bank that participates in: https://www.insuredcashsweep.com/home
and have multiple-millions FDIC insured with only one account needed.
 
omni550 said:
I wonder if it might also refer to the millions of people who lost their homes to foreclosures, thereby losing their 'savings' (= the funds they had already invested in their homes while still holding a mortgage, which they might not have been able to keep paying if they lost their jobs).

omni
Click to expand...

One scary thing I read back then was people who had lost their jobs then drained their retirement accounts to try and keep their home.

Which often meant they ended up with no home, and no retirement.

I'd urge those you know to not do the above.

Tell them to walk away and risk a deficiency judgment rather than empty their retirement accounts, which are usually protected from creditor judgments.
 
I think from the responses you get it that not many (if any) think the thread title is more than a reporter looking for headlines. Savings in a bank or credit union are insured and have little chance of being lost.


First point, I think the title refers to investments and perhaps home values as part of the savings lost.


Second point, I would question how many lost millions even when you consider savings, investments, and home values. In 2008 which many refer to home prices fell, some sharply, equities fell in price, and my beanie babies became worthless.


Third point: Many homes were valued by inflated sales in 2007. Our current home was sold to previous owner at $170K above what we paid for it. Since then it has recovered about somewhat above what we paid. Many people would consider the $170K as a part of any loss, but it was never worth that much. My neighbors who considered the drop in assessed or assumed value of their homes see that as a loss. However, it was never worth that much. The prior owner paid way above a reasonable value. Point here is many would consider loss from peak prices, which may not be a reasonable assumption.
 
Just_Steve said:
What does "millions lost their savings" mean?

It means nothing. I know tons of people who lost their investments but not one who lost their savings since the depression era.
Investments are not savings and savings are not investments. Words have meanings.
Click to expand...


When most refer to retirement 'savings' accounts it includes investments. One of my retirement accounts is the Thrift 'Savings' Plan (TSP) which offers several 'investment' options. My Health 'Savings' Account (HSA) has 'investment' options.
 
To give a fairly recent example going back to the 1980s there was Penn Square Bank in Ok city, which went belly up and depositors with over 100k in the bank (the FDIC limit at the time), got the 100k plus a recievers certificate set at 50% of the value of the account above 100k. The payout in the end depended on how much was recovered in the workout process with the bank. I suspect the same thing happened in the 1930s that over time some percent of money folks had in the failed bank, was recovered. At Indy Mac depositors received 50% of their over 100k deposits back.

On it is not clear what wiped out in terms of over the limit of FDIC insurance means, other than taking a haircut on that money, but a haircut is not being wiped out. (Imprecise wording by Journalists and Headline Writers)
 
Ok, thanks for the responses. To clarify, I am an SHE and soon to be a permanent resident of the USA and working in healthcare. :)

What is the guarantee or what is the proof that FDIC insurance actually worked?? Say if someone had 200k savings in Lehman brothers in 2008, did they get paid back??

I read somewhere that in case of a company getting insolvent, they debts are cleared and first and the retail account holders are paid if something is left over :)
 
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