Should COVID-19 Change Your Retirement Plans?

Among the many financial uncertainties you’re experiencing as a global pandemic upheaves the country’s economy, retirement funds might be top of mind. A new survey by TransAmerica reported that 23% of workers feel their confidence in retiring comfortably has declined in light of COVID-19.

The most important thing to remember in the face of uncertainty is to not make any rash decisions. Volatility in the market is a normal factor in retirement funding and almost everyone will experience it at least once. Though this specific volatility is unique, it’s a common factor for financial investments.

Planning for retirement is not a set-it-and-forget-it investment — you must actively monitor your accounts to ensure your money is working for you so you can retire comfortably.

“Retirement planning is a continuous process of assessing your current position, implementing adjustments if needed and monitoring the results,” says Todd Soltow, the co-founder of Frontier Wealth Management.

The key to a successful retirement hasn’t changed; proactive planning and thoughtful strategy are needed to achieve retirement goals. The particular strategy will vary depending on how far away from retirement you are.

In this article

    If you wanted to retire this year, don’t panic — reevaluate your goals

    If you were planning on retiring in 2020 or even 2021, the pandemic-related market changes may have spooked you.

    “Many 401(k)s we are seeing are now positive over the last 12 months, after being down 20% or more just a few months ago,” explains Matt Hylland, financial planner at Arnold and Mote Wealth Management. “You certainly do not need to delay retirement just because of the pandemic. However, you need to make sure your retirement portfolio is in order. The key is to be in a set of investments that you are comfortable with to ride out periods like we just experienced.”

    You might want to make quick changes like buying a retirement property — but it’s a seller’s market right now. You might also think about liquidating your retirement fund into cash, but you’ll lose out when the markets take off again in addition to losing value on that cash due to inflation.

    Keep calm as you examine your current retirement funds and play out all your options. Do some cash flow simulations and stress tests to see what it’d look like for your retirement portfolio if you started withdrawing soon. Depending on how diverse your portfolio is, you may be good to go without making changes.

    [Read: The Easy Path to Retirement]

    Perhaps the biggest reason to consider delaying retirement is sequence risk returns. This concept refers to how a bad return at the beginning of your retirement will negatively impact the entire life-long value of the fund.

    Imagine it as the reverse of investing young and seeing it compound — by taking out during a dip in the market, the amount that would have continued to grow decreases. Because the market is in a negative trend, each withdrawal is not balanced out by market gains and there’s less money in the fund to grow over time. It can be a complicated concept in theory, but by playing out the hypothetical impact on your own portfolio, you can get a clear idea of what withdrawing now will do to your fund.

    Though you can retire and receive Social Security benefits as early as 62, you may want to delay if you’re not at the Full Retirement Age, which is 66 to 67, depending on the year you were born. By waiting until you reach FRA, your monthly benefits will increase when you do retire (by a percentage based on your birth year.)

    You certainly do not need to delay retirement just because of the pandemic.
    – Matt Hyland

    If you delay retirement past the FRA, the benefit increases further until age 69. If you have the means to continue working, delaying your retirement could lead to an increase in benefits (and more income to contribute) that will offset any hits your 401(k) is experiencing right now.

    If your portfolio is feeling too risky, you can certainly reallocate to more stable investments.

    “We have found several retirees who were invested in high-yield bonds who realized they were too risky of investments for them in their retirement portfolios,” Hyland explains. “Prices have largely recovered, and now is a great time to make changes to safer bonds, such as treasuries, to reduce volatility for the next decline.”

    If you were planning on retiring soon and need help mapping out the current market’s impact, you should consult with a financial advisor.

    If retirement is on the horizon, be proactive — revisit your portfolio and finances

    If retiring is the next big milestone and you’re starting to plan for it in the next 5 to 20 years,, you’ll want to revisit your portfolio. You may have less time to recover from the economic effects of pandemic than younger generations, but you still have time to make big changes before retirement.

    Here are some ways you can be proactive about retirement right now:

    • Pay off debt. Except for perhaps your mortgage, all other debt should be prioritized. A recession can mean a less stable source of income and you’ll need everything you have for cost of living expenses and emergency funds.
    • Diversify your portfolio. Find multiple ways to save money for retirement. This is also called a bucket plan. Invest in real estate, save cash, seek the stability of U.S. Treasury Bonds and be aggressive with some stocks.
    • Examine investment strategies. Analyze the projected returns of your current strategy and consider switching it up to maximize the current market. For example, dollar-cost averaging is a strategy often recommended for retirement funds. Its goal is to reduce the impact of market volatility by dividing up the total investment amount into periodic purchases.
    • Consider working longer. Working for a few more years than initially planned could help to increase your investments and maximize benefits. This doesn’t necessarily mean staying in your current career for longer. Side jobs like a crafting business on Etsy, online tutoring, blogging or gig work can be a simple income addition.

    You still have time to consider the long game, don’t jump the gun for fear of things getting worse over the next couple years. Be proactive about setting yourself up for success and become very familiar with your current portfolio.

    If you’ve got decades before retirement, don’t sweat it — maximize the time you have now

    For Millennials and Gen-Zers who are just getting started on retirement investing, stay the course. Investing is all about long-term strategy and you’ve got plenty of time. With retirement decades away, the market gains and losses aren’t very impactful. The investment will self-correct and it’s unlikely you’ll feel the effects of the pandemic on your funds by the time you retire in 40 or so years. However, continue contributing to your retirement starting as early as possible to take advantage of the time you have now.

    “I would encourage everyone to contribute as much as they can reasonably afford to their 401(k). Especially in their early years, the effects of compounding interest and the tax advantages really add up over time,” adds Todd Soltow, co-founder of Frontier Wealth Management. “At a minimum, you should always contribute an amount that maximizes any employer contribution.”

    Experts note that you should be contributing at least enough for the full match of your employer if they offer that benefit. For example, if your company matches contributions up to 4%, then 4% should be your minimum contribution. That 401(k) matching benefit is free money, so take full advantage of it.

    Consider slowing contributions and taking a more passive approach if you have significant debt to pay off and need to build up an emergency fund — both of which will be especially important during a recession. But if you can afford it, increasing your contribution while the markets are lower can pay off big time as it compounds over the next few decades.

    [Read: Roth IRA vs 401(k)? You May Not Have to Choose]

    Open a Roth IRA to increase your retirement savings

    No matter how far from retirement you are, opening a Roth individual retirement account (IRA) is a great way to benefit your retirement fund.

    “Now is also a great time to utilize a Roth IRA option in your 401(k) if your employer offers it,” says Gary Borowiec, Chartered Financial Consultant (ChFC) and CEO of Madison & Main Advisors. “With a Roth, you pay taxes upfront based on your current tax rate instead of when you withdraw your savings in retirement — and your account grows tax-free all the while.”

    When you invest in a Roth IRA, you are investing your post-tax money in return for tax-free withdrawals. The future inevitably holds tax increases and inflation, making a Roth IRA a great way to make the most of your savings. While most employers don’t offer a Roth IRA, you can open an account on your own.

    We welcome your feedback on this article. Contact us at with comments or questions.

    Danika Miller

    Personal Finance Reporter

    Danika Miller is a personal finance reporter at The Simple Dollar who specializes in banking, savings, budgeting, home insurance, and auto insurance. Her reporting has also been featured at,, and elsewhere.

    Reviewed by

    • Andrea Perez
      Andrea Perez
      Personal Finance Editor

      Andrea Perez is an editor at The Simple Dollar who leads our news and opinion coverage. She specializes in financial policy, banking, and investing.