How to make the most of your retirement plan during an economic downturn 

If you're looking at your portfolio and cringing, don't panic yet — here's what you can do

Published April 19, 2020 2:00AM (EDT)

Stock Market Arrow Graph Going Down  (Getty Images)
Stock Market Arrow Graph Going Down (Getty Images)

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Signs of an economic slowdown abound. The Department of Labor reports unemployment claims rose to 6.6 million the week ending March 28, a dramatic spike from 3.3 million the week prior. Indeed, as small businesses are forced to close due to the pandemic, jobs are being lost at a rapid clip. 

Are you one of the fortunate ones who remain gainfully employed? You might be curious as to how to adjust your job's benefits now that the economic situation has shifted overnight.

Most people put their retirement plans on autopilot while they're working. But getting your head around the ins and outs of the benefits extended to us can boost one's overall financial well-being. It could help you grow your money, or lower how much you pay in taxes. 

If your workplace offers an employer-sponsored retirement account like a 401(k) or 403(b), here are some ways you can make the most of this valuable investment vehicle during an economic downturn like the one we're suddenly in: 

Set up automatic contributions. Trying to figure out whether you can afford to save can be a stressful endeavor in itself. That's why the "set it and forget it" approach works so well. When you opt into something beforehand, and put it on autopilot, you can ensure you're tucking a bit aside for retirement. 

Most 401(k) plans enable you to auto-contribute straight from each paycheck. Unsure as to how much you can reasonably contribute per pay period? Start with 1% of your paycheck. Then, if you can comfortably do so, increase it by a percentage every few months. 

Besides saving for your nest egg, note the tax incentive: Money stashed into a 401(k) from your earnings is before-tax dollars, which bumps down your taxable income. And during lean times, a dollar saved is a certainly one earned when it comes to paying Uncle Sam.  

Save enough to get the employer match. If you're able to — and your employer still offers it — park enough money from your earnings to scoop up the employer match. Let's say your workplace matches 50 cents to every dollar, up to 6%. That's 3% of your income that you could gain in retirement contributions. Employer matches are considered part of your compensation package. If you don't tuck away enough to get that match, that's money you're essentially missing out on. 

Don't stop making contributions. Whenever possible, don't stop saving for retirement. Of course, if you're close to entering a negative bank balance after the bills are paid and you've exhausted all other attempts at money-saving measures, you should hit the "pause" button.

Still, this advice stands true even when there's volatility in the stock market. Stock market performance inevitability endures dips and rises. And while it might feel scary, over the long run the stock market historically has made a 10% annual return.

Likewise, when the stock market is down is actually the best time to invest. Putting a halt just because you're feeling uneasy could have you missing out on returns later. What's more, it could have you lagging in your retirement goals. 

By not making any contributions to your 401(k), you lose out on tax savings. Plus it'll be harder to stay on course later. If money is tight, put in a small amount, or revert back to just a percentage of your earnings. That way, you stick to the habit of saving for your nest egg.

And while you might want to make changes to how you invest or what you invest in, dollar-cost averaging might be your best bet. This is a tactic by which you put in a set amount of money into your investment on a regular basis, no matter how the stock market is performing. 

Do a financial check-in. Finally, perform a quick assessment to make sure you're on track with retirement goals. To see how much you might earn over time by putting money into a 401(k), you can use a handy tool like a retirement calculator. has a good compound interest calculator tool, which shows how much your money will grow due to compound interest. 


Itching to talk to a professional? Some workplaces offer free financial counseling sessions through the Employer Assistance Program (EAP), a common benefit that millions of salaried employees have through their jobs. 

That illustrious day when you can hang up your work hat and retire might be decades away. But not taking action now means you'll need to be working longer or saving more aggressively. You can set up a time to speak to a human to suss to see if you're on track financially. 

On-the-job benefits such as a 401(k) plan are not to be dismissed or overlooked. Optimizing your workplace retirement plan could help you grow your money and stick to your long-term goals amid an economic downturn. 

By Jackie Lam

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