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It’s small comfort to know that the S&P 500 compound return over time from 1926 thru 2014 was 10.12%, or 6.99% inflation adjusted ; “over time” is no substitute for timing. When your executives approach retirement, they want to know: Will a sudden market downturn undo the nonqualified deferred compensation (NQDC) balances they’ve accumulated?

Market growth is great, but market volatility is a very reasonable thing to fear. Recent stock market swings find many executives seeking safer places to put away what’s left of wealth accumulation. Their at-risk assets represent the financial future many executives and key employees anticipate enjoying in retirement. Some account holders report that they are considering postponing their original targeted retirement date due to these shrinking account balances. Are yours?

Despite the recent run-up in the stock market, many executives remember the economic turbulence during the decade of the 2000’s. Following the market downturn in 2000, 2001, 2002 and, again, in 2008, NQDC balances dropped substantially. An executive with a deferred compensation balance of $1million in 2000, invested in the S&P 500, saw that balance drop 9.1 percent that year, and then again 11.9 percent in 2001 and 22.1 percent in 2002*. At the end of 2002, the executive’s $1 million account balance was worth only $624,000.

Sure, things improved, beginning with a rebound in 2003. With a gain of 26.7%,* and continued gains over the next four years, our hypothetical executive investor would have seen his account balance climb back to $1,141,000 by the end of 2007.

Then 2008 happened

Suddenly, 2008 arrived, and we witnessed in disbelief the S&P 500 lose 37 percent*. To our executive, that meant a spiral-down to an account balance of $719,000, a single year drop of more than $400,000.

Now, go back to 1999: The stock market had finished a remarkable decade, up 18.2 percent* annually, and equity linked investments were very popular. But, investing in the S&P 500 (including dividends) during the 2000’s was essentially flat-the so-called “lost decade”-with a compound return of negative .95 percent* on a beginning of the decade investment account.

For our executives, the real question is: Will another “lost decade”-or even a bad year or two before retirement-also mean lost retirement savings?

In our next post on the subject, we’ll explore the options investors have traditionally used in an attempt to hedge their bets and protect their retirement incomes.

*S&P 500 Returns were calculated based on S&P Total Return data available on YCharts.com.