What to do now, as the pandemic surges yet again in the U.S.

COVID-19 is once again raging throughout the U.S., and in much of the world it has never stopped doing so. Safe and highly effective vaccines are available, but not everywhere, and even where they are, not everyone who is eligible has gotten them.

That means there is still the possibility of accompanying financial volatility, despite steady job growth across the summer of 2021. Does that suggest that you should change your retirement strategy? Maybe. If so, how? There are a number of factors to weigh in terms of whether—and how—to change course.


  • If you’re still working, you should keep funding your retirement accounts and possibly add even more money to an IRA.
  • If you’re out of work, preserving what you have in your retirement accounts should be a high priority.

    A Crisis Without Precedent

    While it’s often useful to draw on the lessons of the past, history sometimes has little to offer. Unlike the Great Recession of 2007–2009 or the Great Depression of the 1930s, for example, the recent economic crisis in the U.S. wasn’t driven by financial fundamentals, but rather by society’s deliberate effort to shut down large parts of the economy. The closest parallel may be the so-called Spanish Influenza pandemic of 1918, although that played out at a time before Americans gave much thought to retirement and when life expectancy in the U.S. was significantly shorter.

    Some economic commentators are predicting a swift economic rebound and even alluding to a new Roaring Twenties akin to the one that followed the end of the First World War and the 1918 pandemic. Others aren’t so sure. And don’t forget what came after the original Roaring Twenties—the Great Depression.

    If You Have a Job—or Not

    So what’s a conscientious retirement saver to do? That depends in large measure on your current work status.

    If you’re working

    People who were lucky enough to have money coming in—either from their own work or that of a significant other—were in decent shape to ride out the financial crisis. And happily, many who lost their jobs or were temporarily furloughed in 2020 have since returned to the workforce. If you’re currently working and saving for retirement through a 401(k) or similar plan, it’s smart to stay the course, even if your employer, like many, temporarily suspended its match.

In fact, if you’ve been working from home this past year and a half, you may actually have more cash available because of reduced commuting expenses, less frequent dining out, and so forth. That could be an opportunity to put additional money aside for retirement by contributing to an individual retirement account (IRA). For 2021 the maximum contribution is $6,000, or $7,000 if you’re 50 or older.

If you’re out of work

People who lost their jobs in 2020 and have yet to rejoin the workforce are obviously in a different situation. Your goal should be to preserve your retirement savings to the extent possible. That means taking advantage of unemployment insurance and any other assistance for which you’re eligible through existing programs. You may also be able to negotiate with your creditors, such as mortgage lenders and credit card companies, to reduce, postpone, or spread out any payments you owe them. If you have an emergency fund, as financial planners often recommend, it should be your first resort. Of course, after 18 months of pandemic unemployment, it would be a hardy emergency fund that wasn’t exhausted.

That said, 401(k) loans and early withdrawals from your retirement plan shouldn’t be your first recourse for cash. A 401(k) loan will typically have to be repaid within five years—and sooner than that if you lose your job. An early withdrawal from an IRA can trigger income taxes and a 10% penalty and also mean you’ll have that much less money saved for retirement.

On the other hand, they could cost less than other types of loans, so you should weigh your options.

Whatever you do, don’t neglect your health insurance. A large, unexpected medical bill can be financially devastating and possibly lead to bankruptcy. If you still have health insurance, your insurer may be willing to extend your payment deadlines if you ask.

Finally, if the financial crisis cut into your retirement savings or made it difficult for you to keep contributing, think about retiring a little later than you originally planned, once you’re back in a job. Working a while longer allows you to save more, and delaying Social Security—up to age 70—will mean bigger monthly benefits when you begin to collect them.

If you’re already retired

Those who have already retired from the workforce are in yet another situation. If your retirement income—from Social Security and other sources, such as pensions and systematic withdrawals from your IRAs and other retirement accounts—is sufficient to pay the bills, you may not need to change much of anything.

It could be difficult, however, if you have adult children who saw their incomes evaporate in the pandemic. The impulse to help your kids is an admirable one, but it can become a problem if it causes you to spend savings you’re depending on for retirement. Harsh as it may seem, it’s worth remembering that people who are still of working age have years ahead of them in which to catch up, while retirees have much less time and opportunity.

Preparing for Whatever Lies Ahead

When the worldwide COVID-19 crisis finally comes to an end, we all may want to take stock of our finances. Meanwhile, now could be a good time to:

Review your asset allocation

The pandemic and resulting financial crisis caused some wild swings in the stock market at first, with the Dow Jones Industrial Average (DJIA) up hundreds of points one day and down hundreds of points the next. Still, if you have cash to spare and can live with volatility, stocks may still present the best opportunity for long-term growth, especially as the Dow is more than 6,000 points higher in Aug. 2021 than it was when the pandemic began and has been climbing pretty steadily since Nov. 2020.11

If you’re simply trying to safeguard what you have, you should at least make sure your money is allocated the way you want among stocks, bonds, and cash. If you are coming up on retirement fairly soon, you might consider shifting into a somewhat more conservative portfolio and consider Investopedia’s advice on how to achieve optimal asset allocation (including a range of model portfolios from conservative to very aggressive).

Build (or rebuild) an emergency fund

If you didn’t have an emergency fund before 2020, you probably wished you did. If you did have one, you may need to replenish it. There are numerous philosophies about structuring emergency funds. Some suggest saving at least three months of living expenses in a liquid account, while others recommend having six or more months’ worth of cash. Achieving even that lower figure can be painfully difficult when you’re living paycheck to paycheck, but it’s a goal worth building toward at any age.

If you’re about to enter retirement, or already there, you may want a substantially larger emergency fund. Keeping two or three years’ worth of expenses in a money market fund or short-term bond fund, for example, could help you weather another crisis while leaving the rest of your retirement portfolio intact. That could save you from being forced to sell investments at the bottom of the market in a bad year. This is especially true once you reach 72 and have to take out required minimum distributions from tax-advantaged retirement funds.

Consider also keeping a cache of emergency-fund savings in those funds to use if the market plummets. If there is no crisis, no harm done. You’ll just be that much better off.

Should You Change Your Retirement Strategy Due to COVID-19 if You’re Employed?

Generally no, but you should make it a point to stay the course with your retirement funds, even if your employer has temporarily suspended its match. Those who have been working from home during the pandemic may have increased funds available due to reduced costs (no commuting, no dining out, fewer expenditures for movies, concerts, and the theatre). If that is the case you might be wise to put additional money aside for retirement.

Should You Change Your Retirement Strategy Due to COVID-19 if You’re Unemployed?

Obviously, you need to do whatever is necessary to keep your head above the financial waterline, but you should try to keep your retirement funds intact for as long as possible. Empty other accounts first. Try to eschew early withdrawals, as they can come with penalties and will, of course, reduce the amount of money you have for retirement. Avoid losing your health insurance at all costs, as large medical bills often cause bankruptcy. If you have to interrupt and/or raid your retirement savings, make sure to start again as soon as you are once again employed and consider retiring a bit later than you initially planned to make up for lost time.

Should You Change Your Retirement Strategy Due to COVID-19 if You’re Already Retired?

If your retirement income has been enough to live on, then you probably don’t need to change anything. However, be prepared to resist entreaties for cash from your adult children except in the most dire emergency. Helping them out financially could irreparably damage the safety of your retirement. Remember, being younger they have much more time to make up for lost funds than you do.