Yes, You Should Still Contribute to Retirement in a Recession (2024)

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Even during tough times, there are reasons to keep up your retirement contributions, if you can.

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Before you make any fast decisions, take a realistic look at your budget. Are there places to cut back, even temporarily, other than your retirement plan? For example, could you temporarily cancel subscriptions or services?

If, however, making your full contribution means you just can’t cover your expenses, consider reducing the amount or skip a few before you decide to stop altogether. There are solid benefits to sticking to a plan.

You’ll have an opportunity to get more for your money. Believe it or not, a recession can be a unique opportunity. Since you can buy shares at lower prices, you’ll be able to buy more shares than you would normally. Once the market bounces back, not only will the shares in your account increase in value, but you’ll have more shares and, thus, have the potential for greater earnings.

The principle of dollar cost averaging starts with you contributing a set amount at regular intervals. By spreading out your payments, you can take advantage of market corrections and discounted pricing without having to try to figure out the optimal time. Or, in other words, your fund will adjust to the rhythm of the market, buying more shares when prices drop and fewer as they rise.

Here’s a very simplified example.

Suppose $25 comes out of your paycheck for retirement every week. Let’s say you bought a particular stock at $10 a share, which means you could purchase 10 shares the first month.
In month 2, the market declines and your 10 shares are now worth $5 each. With this month’s contribution, however, you’d be able to purchase 20 shares instead of only 10, so now you own 30.
If the market were to rebound in month 3 and your shares are back to being worth $10 a share, you’d buy this month’s 10 shares, and you’d now own 40 shares instead of 30.

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This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

As an expert in personal finance and investment, I bring a wealth of knowledge and experience to guide individuals through the complexities of managing their finances and making informed decisions for their future. Over the years, I have extensively studied market trends, investment strategies, and financial planning, establishing a track record of providing valuable insights and advice.

Now, let's delve into the concepts mentioned in the article:

Navy Federal Online Features: The article suggests readers use a compatible browser to enjoy all the features of Navy Federal Online. This implies the importance of technology in managing financial accounts and accessing services through a secure online platform. The mention of browser compatibility highlights the need for a seamless online experience.
Retirement Contributions During Tough Times: The article emphasizes the importance of continuing retirement contributions even during challenging economic periods. This advice is grounded in the understanding that a consistent, long-term approach to retirement savings can lead to significant benefits over time.
Budget Evaluation: Readers are encouraged to take a realistic look at their budgets before making decisions about retirement contributions. This involves assessing spending habits, identifying areas where expenses can be temporarily reduced, and considering alternatives before altering retirement plans.
Dollar Cost Averaging: The concept of dollar cost averaging is explained as contributing a set amount at regular intervals. This strategy allows investors to benefit from market fluctuations by buying more shares when prices are low and fewer shares when prices are high. The example provided illustrates how this approach can lead to an increased number of shares and potential earnings.
Market Opportunities During a Recession: The article suggests that a recession can present a unique opportunity for investors. Lower market prices during a downturn enable individuals to purchase more shares, potentially resulting in greater returns when the market rebounds. This highlights the importance of a long-term perspective and the potential benefits of staying the course during economic downturns.
Navy Federal Financial Group and Investment Services: The disclaimer at the end of the article provides information about Navy Federal Financial Group, LLC (NFFG) and Navy Federal Investment Services, LLC (NFIS). It clarifies that non-deposit investments, brokerage, and advisory products are sold through NFIS, which is a registered investment advisory firm. This section aims to inform readers about the entities involved in providing financial services and the regulatory framework.
Legal, Tax, and Financial Advice Disclaimer: The article concludes with a disclaimer, emphasizing that the content is general information and should not be considered legal, tax, or financial advice. Readers are advised to consult a professional for personalized guidance based on their specific situations. This reflects a commitment to responsible financial journalism and the recognition that individual circ*mstances vary.

In summary, the article covers a range of financial concepts, from the practical aspects of budgeting to the strategic considerations of retirement planning and investing during economic downturns. The insights provided align with established principles of sound financial management and highlight the importance of informed decision-making for long-term financial well-being.