Sunday, August 12, 2007

Market Falls – Increase 401k Contribution

With the market in troubled times, many people think the prudent strategy is to reduce their 401k contributions. At the very least, they want to put all their money in the Money Market Fund or the Stable Value funds.

Although counter-intuitive, the falling market is the perfect time to increase your 401k contribution.

1. As the market falls, you are buying more shares for each dollar you contribute.
2. When the market turns around, you are already invested in a way designed to maximize your upside.

I am increasing my contribution from 9% to 10%. With the company match (we don't have any pension), I am going to be saving 14.5% of my salary.

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