It’s the “best time” to pay into a retirement plan, says the advisor
A separate Analysis by Vanguard also found that average 401(k) balances fell 20% in 2022 to $112,572 and hardship withdrawals increased slightly.
“The concern is, in these uncertain times, will I continue to add money to my long-term plans?” said Louis Barajas, CEO of International Private Wealth Advisors, a board-certified financial planner and a member of CNBC’s Advisor Council.
In fact, “this is the best time to keep contributing.”
After double-digit losses in 2022 in both equity and bond markets, it is understandable why some are reluctant to continue investing, especially as fears of a banking crisis spread.
“Everyone wants out when there is uncertainty,” said Barajas.
But if you’re investing for the long term, a falling market is an opportunity to buy stocks at a lower price, he added, a strategy known as Dollar cost averaging that helps smooth out price fluctuations in the market.
“Everyone is under financial pressure”
After a turbulent period, many older Americans are concerned about their retirement savings. Almost half, 48%, of retired Americans believe they will outlive their savings, according to a separate report by Smart real estate found.
At the same time, younger investors could experience their first prolonged downturn. “We’ve had a booming market for almost 12 years, all they’ve seen is the markets are going up,” Barajas said.
“Everyone feels financial pressures — there’s a lot of uncertainty in the markets and in the economy,” said Mike Shamrell, Fidelity’s vice president of thought leadership.
“A lot of people understand that there will be ups and downs,” Shamrell added. “Don’t let short-term economic events derail your long-term retirement efforts.”
To that end, try increasing your 401(k) contribution percentage this year, Barajas advised.
Barajas recommends a savings rate of 15%, including employer and employee contributions. That’s slightly more than the current average, according to Fidelity.
https://www.cnbc.com/2023/03/16/its-the-best-time-to-contribute-to-a-retirement-plan-says-advisor.html It’s the “best time” to pay into a retirement plan, says the advisor