It’s the “best time” to contribute to a retirement plan, adviser says

  • After an already bad year, 401(k) account balances have taken a big hit in retirement, but that makes this the best time to invest, says one expert.
  • According to Louis Barajas, a member of CNBC’s Advisory Board, down markets are ideal for calculating the dollar cost.

A separate analysis from Vanguard also found that average 401(k) balances fell 20% to $112,572 in 2022, and that hardship increased slightly.

“The concern is, in these uncertain times, will I keep adding money to my long-term plans?” said Louis Barajas, CEO of International Private Wealth Advisors, a certified financial planner and member of CNBC’s Advisory Board.

In fact, “now is the best time to keep contributing.”

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After double-digit losses in 2022 for both the stock and bond markets, it’s understandable why some are hesitant to continue investing, especially as fears of a banking crisis spread.

“Everyone wants out when there is uncertainty,” Barajas said.

However, when 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, which helps smooth out price fluctuations in the market.

After a tumultuous period, many older Americans are concerned about their retirement security. Nearly half, 48%, of retired Americans believe they will outlive their savings, according to a separate report from Clever Real Estate.

At the same time, younger investors may experience their first prolonged downturn. “We’ve had a booming market for almost 12 years, all they’ve seen is markets go up,” Barajas said.

“Everyone is feeling financial pressures — there’s a lot of uncertainty in the markets and the economy,” said Mike Shamrell, Fidelity’s vice president of thought leadership.

“A lot of people understand there will be ups and downs,” Shamrell added. “Don’t let short-term economic events disrupt your long-term retirement savings efforts.”

So this year, try increasing your 401(k) contribution rate, Barajas advised.

Barajas recommends a savings rate of 15%, including employer and employee contributions. That’s slightly above the current average, according to Fidelity.

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