Ask TIAA-CREF: Should I Save During Volatile Times?

The value of my 403(b) retirement account is declining because of the latest round of market volatility. I am considering holding off on making additional contributions until the market starts to go up again. Is that a good idea?

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It can be difficult to see your retirement fund account decline and then continue to stay the course in making regular contributions. "Staying on the sidelines" during market volatility, while it may seem appealing at first, can place you at a disadvantage when the market settles down and begins to grow again. Remember this key lesson from the bear market. If you sold at the bottom in October 2008, you lost 30% or more of your retirement portfolio. Many investors who stayed the course have already regained most of what they lost.

Retreating from your long-term plan is a form of  "market timing" — a situation when investors try to anticipate the market's direction (either up or down) in advance in order to make the most of it. Timing the market requires the investor to make accurate decisions on both when to get in and when to get out. Few people (including most experts) get that right all the time. And market timing is the antithesis of maintaining a long-term planning perspective.

The Benefits of Dollar-Cost Averaging

By investing the same amount of money on a regular basis, you may also benefit from dollar-cost averaging1. That means that you purchase more shares of a given investment when prices are lower and fewer when prices are high. Over time, dollar-cost averaging can lower the average purchase price of your shares. It may also be a less risky way of investing than purchasing a large quantity of stock or other investments in a lump sum. If you stop investing now and begin again when prices rise, you may miss out on an opportunity when prices are low and instead get in when prices are higher, lowering your overall return potential.

Investing in a 403(b) or a similar defined contribution plan allows you to put pre-tax dollars aside for retirement and then let any returns on that money accrue tax-deferred. Plus, there's a good chance your employer provides a dollar for dollar match of your invested dollars up to a certain amount. By not investing at least enough money to take full advantage of any employer match you are effectively leaving free money on the table.

You may want to examine your asset allocation, or how you have your retirement money divided up among equities, bonds and other types of investments. Even in turbulent times, you can be well served by sticking with a long-term investment game plan and diversifying your holdings across a variety of asset classes.2

Visit the Market Commentary section of for additional information. If you need further help planning your financial strategy, we encourage you to speak with a TIAA-CREF consultant at 866 861-8363. View our prospectuses here.

1 Dollar cost averaging does not assure a profit or protect against a loss in declining markets. Because such a strategy involves periodic investment, you should consider your financial ability and willingness to continue purchases through periods of low price levels

2 Diversification cannot eliminate the risk of fluctuating prices, uncertain returns, and investment losses.

TIAA-CREF products may be subject to market and other risk factors. See the applicable product literature for details.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY.

©2010 Teachers Insurance and Annuity Association-College Retirement Equities Fund, New York, NY 10017.

© 2014 and prior years, Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), New York, NY 10017