My Gov't TSP plan (equivalent to a 401K) has dwindled down over 6K in the past year. I contribute to the ?
L fund and have 10 yrs before I retire. It sickens me to see my hard earned/saved retirement go before my eyes! (I mean 6, 000 is al ot of money to me!!!) Should I temporarily discontinue my auto investment of $400 a paycheck (tax deferred, I realize) and take that in my after taxed paycheck and maybe put it (probably would be about $300 only after taxes) in my 3.5% interest bearing savings account? (HSBC online).
I really could use some advice from a knowledgeable person in this area. Thanks so much in advance for your time/answer.
- Steve DLv 71 decade agoFavorite Answer
Because you have 10 years to go until retirement, you have plenty of time to wait out the current downturn. In fact, the current stock market dip may actually work in your favor. By continuing to invest in the L fund, you will be buying stock at low prices, meaning you will get more shares for the dollar. this means when they rebound (which they will, historically speaking), you will catch more of the run-up.
Also, don't forget that discontinuing your auto-investment also discontinues the auto-match, so your $400 investment remains at $400, instead of $400 plus whatever the government is kicking in (I assume you are at least getting the 4.5% match meaning the government is probably kicking in at least $200 - where else can you get 50% interest).
Plus, as you point out, you would take the tax hit and the interest paid at HSBC barely covers inflation (and will probably go down if the Fed decreases the interest rate).
Please do a bit of research on the theory of dollar cost averaging - it will set your mind at ease I think.