Why You Should Still Prioritize Retirement Contributions in a Bear Market
Worst Market in About 50 Years
During the year’s first six months, the US stock market posted its worst returns since 1970. The broad market S&P 500 index has fallen about 20% in the first two quarters amid the Fed’s tightening monetary policy, prompted by the highest inflation in decades.
Though the labor market remains tight, consumer confidence is showing signs that more Americans are worried about a possible recession. Many are thinking about how to stretch their incomes amid escalating prices for everything from groceries to gas. With so much financial uncertainty, some people are holding on to dollars they may have invested during less troubling times.
Fleeting Opportunity
A May 2022 survey by BMO Harris found 21% of Americans have dialed back contributions to their retirement accounts. But advisors say those who are considering taking a pass on this year’s investment may want to rethink that decision.
Regularly investing in a 401(k), IRA and/or Health Savings accounts allows your portfolio to benefit from tax-advantaged growth for a longer time, which can make a big difference when it comes time to retire.
Priorities
If locking up these dollars creates anxiety, some account managers suggest a prioritized approach. 401(k)s offer the highest contribution limit. Health Savings Accounts, or HSAs, can snag triple tax advantages. A Roth IRA can diversify tax exposure as taxes are paid up front, rather than when funds are withdrawn after retirement, as with a traditional IRA.
Zooming out, long term goals such as retirement should still remain a priority during market uncertainty. With the proper risk tolerance and time horizon, investors have more time to weather the storms.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Adviser
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS22071903
All your finances.
All in one app.
App Store rating
