It might be tempting to put 401(k) contributions on hold, but sticking with it is a better strategy
Amy Arnott of Morningstar
Amid this year’s market turmoil, I’ve heard investors wonder if they should hit pause on 401(k) contributions until things settle down.
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Though this approach sounds tempting, it’s better to stick with your investment strategy instead of waiting for conditions to improve.
Running the numbers
To test how a “wait and see” approach would have fared compared with continuing to invest, I looked at four different market downturns of the 21st century.
In each case, I looked at results under two different scenarios: an investor who started saving $500 per month and continued to do so throughout downturns, and another investor who stopped saving until the market started to improve. I assumed all contributions were invested in stocks. (In the first four cases below, I assumed that contributions were only paused during the bear market in question and then resumed for all the periods that followed.)