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How to Save for Retirement During the Coronavirus Crash

Whether you're in your 20s or close to retirement age, chances are high that the global pandemic has had an impact on your retirement plans.

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How to save now

Figuring out how much you can afford to tuck away for retirement can be a challenge—especially in the current financial climate. With unemployment claims at record highs and the stock market in turmoil, much of the typical financial and retirement advice doesn’t apply at this time. So we reached out to financial experts to gather advice on for the best ways to save for retirement during the Coronavirus crash. Find out what to cut out of your budget during a pandemic.

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Try the 60 percent solution, with a twist

No matter where you are in your retirement journey, Sharon Epperson, senior personal finance correspondent and lead contributor to CNBC’s Invest in You, recommends the 60 percent solution. This approach breaks down like this: 60 percent of your gross income is allocated to “committed expenses” like housing, food, groceries, debts, and taxes; 10 percent of your income goes into high-yield savings account for emergencies and short-term savings; and another 20 percent of your income should go toward long-term and retirement savings. As for the remaining 10 percent, in normal times, that would be earmarked for “fun money” to go out to dinner, get your nails done, or play a round of golf, Epperson shares. However, the pandemic has changed that. “Now, what’s ‘fun’ may be what brings you peace of mind, including not being in debt, feeling financially stable, and having enough money in the bank to pay your expenses in an emergency,” she says. So you may want to direct that last 10 percent to a bank savings account as well. These are the credit card rules you can break in an emergency.

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Invest if you can

“While investing isn’t the right move for everyone during the coronavirus crisis, if you are fortunate enough to still have a paycheck, have funds set aside for an emergency, and don’t have debt, there are certainly opportunities to invest long-term,” says Winnie Sun, managing partner of Sun Group Wealth Partners. If your situation allows you to take advantage of investment opportunities during this time, Sun suggests doubling up or even tripling your current 401k/403b contributions, adding to your child’s college savings fund, or adding to your retirement, tax-sheltered savings account like a Roth IRA. “You can always reduce those contributions if you need to when the market starts to recover,” she adds. Get inspired by this single mom who stopped buying 3 things and saved $5,000.

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Take advantage of an automatic savings plan

“Some people with the means to save for retirement may know they need to do so, but they often have difficulty sacrificing present consumption because of a lack of self-control,” notes Echo Huang, CFA, CFP®, CPA, founder and president of Echo Wealth Management. “These people may find excuses not to do so, like ‘It’s hard to make money in the stock markets now,’ or ‘I’ll save and invest later when the situation gets better.'” To overcome what she calls “a self-control bias,” Huang recommends finding “ways to save more that don’t rely on self-control.” For example, you could consider enrolling in automatic savings in your 401(k) plan and increasing savings when you get a raise. Up your financial smarts by learning these 19 personal finance tips you were never taught, but need to know.

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balancing piggy banksTony Cordoza/Getty Images

Make an IRA contribution that will lower your 2019 tax bill

If you haven’t made an IRA contribution to reduce your 2019 tax bill yet, the federal government has done you a favor. The IRS has moved the tax filing due from the usual due date of April 15 to July 15, in response to the COVID-19 crisis. Emily Brandon, senior editor for retirement at U.S. News & World Report and author of Pensionless: The 10-Step Solution for a Stress-Free Retirement, breaks down how this helpful tax deduction works. “If you are in the 24 percent tax bracket and contribute $6,000 to an IRA for 2019, you can reduce your federal income tax bill by $1,440.” Brandon reminds taxpayers who wish to tax advantage of the deduction to “take care to specify that [your IRA contribution] should be documented as a 2019 contribution [not 2020] if you want it to reduce your current tax bill.”

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Avoid heat-of-the-moment decisions

It’s natural for retirement savers to feel nervous about their investments during a market drop, says Fred Egler, financial planner and CFP® at Betterment for Business in New York City. However, “accepting risk is how you earn returns,” Egler says. “Historically, we’ve found that the more an investor changes their allocations, the worse their performance is,” he says. “Unless you want to lock in losses, changing your plan isn’t generally a good idea.” That being said, Egler does note that “those closest to retirement shouldn’t take on more risk than necessary given their time horizon. The most common strategy is to dial down stocks and pick up more bonds.” Find out about 11 financial changes you need to know about with coronavirus.

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Consider a high-interest savings account

For those unable to or uncomfortable with investing in the stock market at this time or if you anticipate needing your funds sooner rather than later, a high-interest savings account is a smart idea, says Jill Gonzalez, an analyst with WalletHub. “The APY is typically somewhere around 1.5 percent, and though that might not seem like much, it’s a good way to start, and it adds up in time.” By the way, APY stands for annual percentage yield; find out more of the financial terms everyone should know by the time they turn 40.

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hourglass on its sidehanamirae/Getty Images

It’s OK to hit the pause button if needed

Workers in their 20s to early 40s still have time to rebound from the coronavirus downturn, says family finance expert Andrea Woroch. “Continue contributing as is, as long as you have healthy cash savings account for unexpected expenses and potential job loss,” says Woroch. That said, if you don’t have a sufficient emergency fund (generally six months of living expenses) and you genuinely don’t have the wiggle room in your budget to build it up, Woroch says that, as a last resort, it’s OK to put a pause on retirement contributions so you can put the extra cash into savings. “We don’t know the long-term impact of this coronavirus on our economy and your job isn’t guaranteed,” Woroch continues. “An emergency savings account is essential and should be your top priority right now.” Of course, Woroch also points out that you don’t have to stop contributing to your retirement account completely. Lowering your contribution might be enough to free up the extra funds you need to pad your emergency savings during these uncertain times. (Just be sure to maintain your company’s minimum percentage contribution to meet its 401k match.) Get the answers to all your retirement savings and 401(k)s questions.

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Beware of trying to “time the market”

Whether you’re motivated out of panic or you’re trying to find a good investment opportunity, trying to “time the market” can be a dangerous game. “People are also trying to time the market when they delay contributions waiting for a ‘better time to invest,'” says Brian Walsh, CFP and manager of financial planning at  SoFi in Claymont, Delaware. “Whether it is adjusting your allocation or delaying contributions, the data proves that timing the market is a bad idea for the average investor.” Instead of making major strategy changes during this time, Walsh recommends that you stick to your plan and continue making contributions. If you’re in the middle of your peak earning years currently, Walsh adds, this advice may be especially important since the percentage of your compensation is at its highest.

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Be careful about investing your stimulus check

In normal times it’s wise to save a portion of the money you receive—whether it be from income or other sources—for retirement. However, Sun notes that this only applies if financially your current financial profile looks similar to before we went into the coronavirus crisis. “For many, the funds that they receive from the stimulus program, should be kept in a totally accessible check/savings account so that it can serve as your financial lifeline for the immediate time,” she says. “Once you resume work, have income coming in again and can get back to your daily life, you can resume saving for your future.” Find out how one woman who lost her job due to coronavirus is now paying her bills.

Michelle L. Black
Michelle Lambright Black is a credit expert, finance writer, and travel writer with nearly 20 years of experience. She's also the founder of, a judgement-free personal finance community for busy moms like herself. When she's not writing about credit and money, Michelle loves to travel with her family of 5 — usually to somewhere sunny and warm.