Despite the Market Downturn, Participants Continue Contributions to Their Retirement Plans

Many financial publications show; a stay-the-course mentality that is either a stubbornness or inertia that could be hazardous to wealth. It's not that experts are suggesting ordinary investors ought to stop kicking funds into the retirement kitty or that they should completely overhaul the investment strategy. It's that investors can't ignore the last few years of volatility, as well as a decade where the broad market has been flat to down, when picking the proper investment strategy for their retirement savings. “Hewitt Associates released a study showing that, despite record losses in 401(k) accounts in 2008, savings and investing habits barely changed at all."

While this view counters the principal of Dollar Cost Averaging, one must consider the nature of savings for retirement. Anything short of a time line where someone is close to retirement and could be adversely affected by a down turn, the advantage of continued savings can far out way the loss of available dollars from not contributing to ones retirement plan.The simple idea of continuing to make contributions allows the principal of Dollar Cost Averaging to work over a long period of time. As one makes a contribution it is invested as the plan is instructed to by the plan participant at the cost of that investment for that contribution. In times of a good market the amount of savings may buy less of unit’s investment and when times are on a downturn the same contribution will buy more units of an investment. This therefore allows over a period of time to have a continual growth in funds and fund values which at any given moment in time may have more or less value.

The timing of when a person is going to retire should reflect the nature of the investment as to risk being high or low. In today’s market one can utilize life style or target investment vehicles where professionally managed funds will help to provide the best tools for someone not wanting to develop their own investment model.The most important consideration is that of time and not market volatility, as time shows that there is a general uptrend over many years, and while the market may dip further or may start a recovery which for some time does not get back to the previous highs, investing over time will prove to be the best hedge for long term growth.