Question: I am thinking of increasing my 403(b) contributions to lessen my tax obligations. However, I am concerned about increasing my contributions while the market is heading downward. I am 29, so I am not planning to retire anytime soon. My employer offers a flat rate towards my retirement fund regardless of my contributions so that wouldn't be a factor. Should I wait till the market heads up before increasing my contributions? Thanks, David

Answer: At your age, you have little to nothing to fear from a down stock market in your retirement savings plan. Indeed, there is even reason for cheer since you have three decades before you tap into the money. You're buying good companies on the cheap.

Look at it this way. Every time you put money into the stock market out of your retirement savings plan you are "dollar cost averaging" your portfolio. Technically, dollar cost averaging means putting the same amount of money into an investment on a regular basis. So you purchased fewer shares when the market was up, say a year ago, and more equity now that when stocks values. So, let's say you're putting $1000 a month into your 403(b) stock mutual fund choice. When the market is strong, maybe you could buy only 100 shares. But now that the market is taking a nosedive, perhaps you can pick up 150 or 200 shares. Since stock prices rise over time, this technique allows you to build up a stock portfolio worth more than the price you paid for it.

Another benefit of dollar cost averaging is psychological. The time-tested stock buying method takes emotion--fear, greed, and panic--out of investing. You are regularly socking money away in all markets, bull and bear alike.

If it were me, I would hike my 403(b) contributions.

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