The value of my 403(b) retirement account is declining because of the recent market volatility. I am considering holding off on making additional contributions until the market starts to go up again. Is that a good idea?
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While every investor needs to make an individual decision about setting money aside, most financial professionals agree that you do not want to miss out on taking advantage of your employer's retirement program.
It can be difficult to see your retirement fund account decline and then continue to stay the course in making regular contributions. But investing in a 403(b) or a similar defined contribution plan allows you to put pre-tax dollars aside for retirement and then let any returns on that money accrue tax-deferred. Plus, there's a good chance your employer provides a dollar for dollar match of your invested dollars up to a certain amount. By not investing at least enough money to take full advantage of any employer match you are effectively leaving free money on the table.
Also, by investing the same amount of money on a regular basis, you can benefit from dollar-cost averaging. That means that you purchase more shares of a given investment when prices are lower, such as the case now for many investments, and fewer when prices are high. Over time, dollar-cost averaging can lower the average purchase price of your shares. It may also be a less risky way of investing than purchasing a large quantity of stock or other investments in a lump sum. If you stop investing now and begin again when prices rise, you may miss out on an opportunity when prices are low and instead get in when prices are higher, lowering your overall return potential.
You may want to examine your asset allocation, or how you have your retirement money divided up among equities, bonds and other types of investments. Even in turbulent times, you can be well served by sticking with a long-term investment game plan and diversifying your holdings across a variety of asset classes.
If you need further help planning your financial strategy, we encourage you to speak with a TIAA-CREF consultant at 1 866 861-8363.
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The information in this material is general in nature and not intended as specific investment advice. Please consult your financial advisor regarding your personal situation. Investing in securities involves risk, including possible loss of principal. Please refer to the prospectus for more detailed information on the risks associated with the variable annuity accounts and mutual funds discussed. Withdrawals are subject to ordinary income taxes and there may be a 10% Federal tax penalty if taken prior to age 59 ½.
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