Ivy Slike had a problem. In September of 2008, when the financial crisis hit, the Hailey, Idaho-based single mother of two was about to send her eldest daughter off to college. But the investments set aside to pay for four years of tuition had recently lost 15% of their value, on their way to eventually losing 40 percent. With pundits and prognosticators envisioning a long, slow slog, Slike wondered if a rebound would come before graduation, and if not, what was to be done.
“I wasn’t sure if we’d be able to pay for the fourth year, and maybe a portion of the third,” she says. “I was going to make sure she graduated, but it would require some heavy restructuring of the plans we had in place.”
The plight of retirees in recent years is well-documented. Sequence-of-return risk and retiring in down markets combine to devastate portfolios, from which they will most likely never recover and necessitating either a return to work or a significantly diminished lifestyle in retirement.
Less well documented is the plight of parents and students, who like Slike, thought four years of college were fully funded only to come up short due to unexpected market events.
“I would gladly have given up some of the gain in order to have some sort of guarantee that the money would be there when I needed it,” she says.