It’s been hard to miss the recent downturn in our economy – you see it on the news and hear it on the radio. The current financial crisis has caused most retirement accounts to lose a lot of money. While it’s never a good thing for your retirement accounts to lose money, especially when you are at or near retirement, it’s not the end of the world. The one thing you shouldn’t do when the market drops is stop your retirement contributions. In fact, now may be a good time to increase your retirement contributions.
It may seem counterintuitive to invest when the market continues to drop, but it actually might be the best financial move you can do right now. Remember, the point of investing is to buy low and sell high. With the market lower across the board, this might just be a golden buying opportunity.
An investment method that takes advantage of the buy low sell high principle is value averaging, which is similar to dollar cost averaging, with the exception that you invest more money when prices drop and invest less money when prices increase.
So whether you invest in the TSP, a Roth IRA or Traditional IRA, a 401(k), or other retirement plan, now is not the time to stop investing. It might just be a good time to increase your contributions. If you have an investment horizon of 10 years or longer, chances are your investments will have ample time to catch up.