The pandemic had a huge impact on the retirement savings efforts of millions of Americans. But don't despair—it's still possible to recover.

By Mia Taylor
April 29, 2021
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The pandemic interrupted life as we know it on many levels, including bringing a halt to the retirement savings contributions of millions of Americans who suddenly found themselves out of work or at the very least, living on reduced income.

UBS survey conducted in January found this is particularly true for women—one in four female respondents are delaying retirement plans due to pandemic-driven financial hurdles. 

But this is hardly a challenge exclusive to women. A recent Pew center study revealed that about half of non-retired adults say the economic impact of the coronavirus outbreak will make it harder for them to achieve their long-term financial goals. 

For instance, about a quarter of U.S. adults age 50 and older expect the coronavirus outbreak to affect their ability to retire. This includes 7 percent who say they have already delayed their retirement and an additional 17 percent think they might have to delay it. The numbers are worse for those who were laid off or took a pay cut amid the pandemic: more than four in 10 (46 percent) say they either have already delayed or think they may have to delay their retirement.

One more notable takeaway from that Pew center study—while 44 percent of survey respondents think they will be back on track in about three years, about one in 10 don't think their finances will recover. Ever.

Let's hope that's not true. 

In fact, that does not have to be your fate. Experts say it's entirely possible to reach your retirement goals after experiencing a setback of a year or more. 

"While getting off track with your retirement savings can be detrimental to your future, it doesn't have to be. Small steps made now towards getting back on track will really pay off in the long run," Emily Franco, CFP, a financial advisor at Fort Pitt Capital Group.

To assist with that effort, we've gathered actionable tips from some of the country's leading money experts designed to help your retirement funds rebound from the devastation of 2020. Here's how to get started.

You may have to restart small, but start now

For those who are still out of work or still grappling with reduced income, try not to give up on your retirement savings efforts entirely, if possible.

"Every dollar counts. Even if you are only able to contribute $50 a month into a retirement account, that's still better than contributing nothing, thanks to the power of compounding interest," says Julie Fox, managing director and market head, UBS Private Wealth Management."That $50 per month, thanks to the long-term average growth of the stock market, could be worth thousands of dollars 10 to 20 years from now."

Don't be afraid of investing

The pandemic taught many of us a very important money lesson: always have an emergency savings account. It's critical to have money you can access immediately to cover living expenses if need be. While that axiom remains true as we move toward a post-pandemic world, it's also important not to become shy about investing while bulking up your savings. Remember, investing remains a critical part of your overall financial planning strategy.

"If your money is sitting in a savings account, it's not growing. While the stock market can be intimidating, the key to retiring sooner rather than later is growing your money as fast as possible," says Fox.

Interest rates on savings accounts are near zero at the moment and aren't likely to increase anytime soon, continues Fox. While investing in the stock market involves risk, the long-term historical average gains in stocks can play a significant role in growing your money and producing enough income for your retirement.

This is especially important amid the type of low-interest rate environment we're currently experiencing, adds Heather Comella, CFP, a lead financial planner for Origin.

“You should hold enough cash for a three- to six-month emergency fund. Six months of spending for a single income household or three months of spending for a dual income household, plus short-term cash needs, usually for the next one to three years, and that’s it,” says Comella.

“Any additional cash should be invested to earn a higher yield,” Comella explains.

Look for part-time or freelance work for the short-term

If you remain out of work as a result of the pandemic, try not to give up on retirement savings efforts altogether. Instead, look for part-time or freelance work and use those funds to maintain your retirement savings progress.

For those who are working full-time but still want to generate extra money to catch up on retirement savings, consider establishing a secondary stream of income.

"Having a side hustle is a great way to give yourself a raise," says Varo Bank's personal finance advocate Carmen Perez. "You can use your 9 to 5 income for general living expenses and focus your side hustle income solely on retirement investing."

Maybe you can take up dog walking during your free time on the weekends or babysit for friends. There are plenty of ways to generate side hustle income for retirement, and this is particularly important if your current job feels a little uncertain. 

"Having a side hustle, in general, is always good insurance for income loss," says Perez.

Don't defer financial decisions to your spouse

If you took a hands-off approach to your family's finances prior to the pandemic, it's high time to change that fact.

"Take steps to understand every aspect of your family's financial situation. You should know how much money your family has in each savings account, checking account, investment account and retirement account," says Fox. "If you don't know where you stand financially speaking, it's going to be difficult to set and achieve financial goals."

Don't waste money

When dealing with the challenge of a job transition or getting back into the workforce, it's important to keep a strict eye on your spending, ensuring that your money is being allocated meaningfully. Every dollar should have a purpose. 

"Are you still paying for a gym membership or an audiobook subscription that you're no longer using?" says Comella, from Origin. "Another example I've seen recently is two partners who live under the same roof both paying for Amazon Prime membership."

Review your spending and account for every dollar and direct any savings you identify through cost-cutting to retirement funds.

Open a Health Savings Account

Another tool you might consider to help supercharge retirement savings efforts is a health savings account (HSA). Though this may sound like a puzzling suggestion, HSAs can be a valuable retirement funding vehicle in many ways. And even more relevant to this discussion, depending on your health insurance coverage, you may be eligible to open and contribute to one whether you're working or not, says Frances Bird, analyst with Garrison Point Advisors

HSAs are considered 'triple tax advantaged' accounts and as such have benefits that may outweigh contributions to other types of retirement plans, explains Bird. 

These accounts are designed to allow for setting aside money to pay for qualified medical expenses. The money in an HSA can be invested in mutual funds and stocks and the investments are allowed to grow tax-free as long as they remain in the account. 

You can also contribute to an HSA on a pre-tax basis, thus lowering your taxable income today and then turn around and use the savings to step up investments in other retirement accounts. For those who are employed, contributions made to HSAs on a pre-tax basis avoid Social Security and Medicare taxes (also known as FICA taxes), says Bird.

Yet another important point, HSAs allow for catch-up contributions as you approach retirement age. Those who are 55 or older can invest an extra $1,000 per year.

Finally, these accounts help your money go further during retirement because if your withdrawals are used for qualified medical expenses (and it's highly likely that you will have some medical expenses during retirement), then the money, including any portion that might be growth, can be accessed tax-free, says Bird.

Contribute to a spousal IRA

If you are part of a couple and one of you finds full employment sooner than the other, make sure to open a spousal IRA for the other. 

"The working spouse can contribute to their own IRA up to the limit and then again up to the limit for the spouse who lacks income or makes very little," says Christie Whitney, CFP and vice president of investment advice with investment management firm Rebalance. "As the 2021 the contribution limit is $6,000 for individuals. That means the working partner can put away up to $12,000."

In addition, those who are 50 or older can contribute another $1000 each, all of which amounts to $14,000 annually.

"This is very important for women, as a large percentage of workers who lost their jobs due to COVID were women," says Whitney. "Given that women often live longer than their spouses, and are paid less during their careers, this is one way that a husband can look out for his spouse's future financial situation when he will no longer be around."

Redeploy assets

Did you receive a tax refund or a stimulus check recently? Did you spend less on entertainment, travel, kids' sports, or day care amid the pandemic? Use that money wisely. 

"While I won't argue that our economy could use the boost from your spending these dollars, saving them is the best way to get back on track," says Nicole Asher, CFP, vice president and senior wealth management Advisor for Greenleaf Trust. "If you have excess money in savings, increase your 401(k) contributions or earmark those dollars toward your financial goals.  On an annual ongoing basis, save any future pay increases or bonuses."

Consider asking for a raise so you can step-up savings

Unfortunately, there continues to be a serious retirement gap for women in this country. While there are several factors contributing to this reality, a major component is lower lifetime earnings, which can lead to lower retirement wealth. Women are still earning less than men. 

"Fighting for pay equity can not only have a short-term financial benefit, but also a long-term impact, like increasing women's ability to put more money away for retirement," says Mindy Yu, director of investments and certified investment management analyst for the personal finance app Stash. "On the plus side, more companies than ever are trying to address pay inequality so now could be an especially good time to ask for a raise or a promotion."

Ultimately, higher earnings can allow for increasing retirement contributions and hitting long-term goals.

And while you're at it, don't be afraid to change jobs, says Eryn Schultz, founder of Her Personal Finance, who says there will likely be a post-COVID hiring boom later this year.  "Many employers will be rehiring," explains Schultz. 

When you job search, focus on jobs that offer higher 401(k) matches than your current employer so that you can build your retirement savings more quickly, she adds.  

"Sometimes, it's easy to focus on the spending side of the money equation and looking for places to cut costs and save money.  However, you can only cut your budget so much, but you can grow your income an infinite amount," Schultz adds.

Take more risk in your retirement account

To some, this tip may seem imprudent if you're already behind on savings. However, if you still have 10 or more years until retirement then taking more investment risk can be a sensible strategy to achieve higher returns, and make up for lost time in order to meet financial objectives, says Jonathan Shenkman, a financial advisor for Oppenheimer & Co.

"For example, an investor who is 40 years old with a 70 percent to 30 percent split between stocks and bonds may want to increase their exposure to an 80 percent to 20 percent split between stocks and bonds," says Shenkman. "This is especially relevant to middle-aged women who still have many working years ahead of them and also tend to live longer than men."

One last point: snowflake savings payments

If there's a single overriding takeaway from all of these advisors and their tips it is likely this: every little penny counts when it comes to getting your retirement savings across the finish line successfully. And if you can do nothing else, try setting aside even minimal amounts. Perez likes to call these micro-deposits "snowflake savings payments."

"Even if you're unable to put a modest amount of money towards retirement each month, small spare change payments made towards your savings and retirement can help," says Perez. "No amount is too small and these small snowflakes start adding up. If you find extra money in your budget or if you were given a monetary gift, consider putting that money directly into your savings or retirement account."