With the market so volatile, does it still make sense to contribute to a 401K?

Asked by Tina

5 Answers

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Answered by Robert Henderson, AAMS® CDFA® in Mystic, CT
Absolutely. Although it may seem counter-intuitive, one of the best times to invest is when the stock market is down. This allows you to buy more shares of stock and/or mutual funds. The truth is, long-term investing success is more about how much you invest over time, and less about the returns you receive. The stock market has always (in the past) recovered from down periods. In fact, the market goes up almost 70% of the time. If you are still in the active investing stage, you should NEVER stop contributing to your 401K.

The other added benefit (hopefully) is employer contributions you may receive. This is "free" money that you should never turn down. | 10.08.15 @ 17:13
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 20:11
Answered by Dennis Gibb, Financial Adviser in Redmond, WA
HI Tina, Yes it makes sense to contribute to the 401k. Remember that the 401k is by definition a long term investment. Over time the risk of owning stocks in a diversified portfolio decline. Volatility is an average and for several years (2010 to 2014) it was below its average so it being higher is just getting it back to average. Volatility and down markets are where investors make their money as it is the time when others are selling in panic giving you a good price. | 10.13.15 @ 19:11
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 20:11
Answered by Richard Eddy, Financial Adviser in La Verne, CA
Without a doubt! When you are in the "accumulation phase" (still building up money for retirement) volatility is your friend! As others have commented, your 401(k), and your retirement savings in general, are long-term plans. By continuing to contribute to your 401k on a regular basis (a process called "dollar cost averaging") you will actually end up with more shares of the funds you've chosen in your 401k, and you will get them at a lower overall cost.

Here's to continued success in your financial plans. | 10.13.15 @ 19:45
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 20:11
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Answered by Days
when market is low in volatility contribute large sum and contribute less when market all time high | 10.13.15 @ 22:29
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 20:11
For the most part, I agree with the other guidance provided, but I will also point out that it significantly depends on WHEN you plan to retire.

If your time horizon is within the next few years, then I would argue against what everyone else has said. If you are 62 and lose 30%, 40%, 50% or God forbid, more of your 401(k) balance (as my mother did in 2008-2009), you simply won't be able to retire, and you won't have enough TIME to recuperate your losses without taking on much higher risk. The date you choose as your retirement date could have a devastating impact on your "Golden Years."

History proves that the market corrects itself about every 7 to 8 years...how long has it been since the last crash? Something to think about...

Research has shown that it is imperative to the longevity of your retirement plan not to incur losses just prior to or during the initial phase of your retirement, also known as the "Critical Phase." Consult with a Retirement Income Specialist for strategies to avoid these and other retirement pitfalls.

I'd be happy to answer any questions you might have...just reach out.

Mike Zaino
www.TZGFinancial.com | 04.02.16 @ 16:42
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$commenter.renderDisplayableName() — {comment} | 12.06.16 @ 20:11
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