10X Chief Executive Officer Steven Nathan explains in this video how pausing contributions or cashing out savings does much more damage to people’s retirements than any financial crisis.
We don’t believe you should pause your contributions because this is exactly the time that you are going to get better value for those contributions. As a retirement saver you are a buyer of shares so you should welcome lower share prices because that allows you to get much more value. We are all getting many more shares for the same R100 or R1,000 we are contributing.
The expectation is that in 5 or 10 years’ time as our retirement funds grow and as we get closer to retirement we should be getting much better value for those savings.
So this would be the wrong time to stop contributing to your retirement funds.
In general, one should be very careful about stopping contributions at any stage. In the long run the amount that you contribute during a working life over 40 years is much more important to a successful retirement than any financial crisis has ever been.
In the long run the effect of financial crises and the volatility of stock markets tend to be minor and have no meaningful impact on our retirement. Stopping contributions and cashing in along the way, on the other hand, is devastating and has a much bigger impact and will have much more negative consequences for us in retirement than market volatility.