I invested a teensy bit extra after the March 2020 stock market crash, but I didn't do more because I was scared. Not by the stock market -- I knew it would bounce back.

What terrified me was the unemployment numbers. Every week, millions more people were suddenly out of work. 

I scrutinized my savings and spending. As it turned out, what I'd called my "six-month emergency fund" wasn't even close. In a prolonged period without income, I may well have been forced to dip into my retirement savings.

But the next time the market tanks, I'll be prepared. Here's my Roth IRA investment strategy for the next stock market crash.

A manicured hand holding hundred-dollar bills.

Image source: Getty Images.

I'm maxing out my Roth IRA, no matter what

Regardless of what the stock market does, I'm maxing out my Roth IRA in 2021, barring a major unseen emergency, just as I did in 2020. Since I'm under 50, that means I'll contribute $6,000. I'm doing this by dollar-cost averaging $500 per month.

By investing on a regular schedule, I'm not only preparing for a bear market -- I'm also preparing for the possibility the market skyrockets. Since I'm automatically investing, I'll pay a premium some months, but I'll also enjoy low prices in others.

I'll contribute extra for every 5% the S&P 500 drops

Of course, I'd rather buy more stocks when they're on sale. So for every 5% drop in the S&P 500 index, I'll contribute an extra $500. That means if the index were to decline 30% in March, my contributions for the month will total $3,500, not $500.

If this happens, I'd hit the Roth IRA contribution limit just halfway through the year. But if I max out my Roth IRA early, I can continue to invest $500 a month on top of what I set aside through my employer's 401(k) plan. I'll invest the extra funds in a taxable account instead.

This could absolutely be a money-losing strategy in the short term, because stocks could experience an extended decline over several months. But the market has recovered from every crash in history, and I'm confident putting extra money in the market after stocks decline will be a winning play for my Roth IRA long term.

The beauty of investing in a Roth IRA as the market falters is the fact the eventual recovery (and accompanying gains) happen in an account that will never be taxed as long as I follow the rules. I'm in my thirties, and I hope I don't need to touch that money for another 30 years or so. The potential tax-free growth is incredible.

When I won't invest extra

If my emergency fund falls below $25,000 for any reason, I'll no longer be in a position to invest more even if the market stumbles 5% or more. In this scenario, I'll instead invest the set $500 in my Roth IRA monthly while rebuilding my emergency savings. And if something drastic happened, like a major illness or job loss, I'd reevaluate the $500 contribution too.

My emergency fund is my best defense during a weak market. It prevents me from having to cash out my holdings when they're down, because I can't otherwise afford a major expense. Sometimes, you have to play defense, and it's OK if you can't take advantage of every opportunity.

My strategy will change based on my life

I spent much of 2020 building up my savings. Then, I buckled down and focused on becoming debt-free. I paid off $12,000 in the final 12 weeks of 2020. I did it through freelancing while setting aside $1 of every $2 I earned for taxes.

Had I ignored my savings, made minimum debt payments, and invested every extra cent, I would have made out like a bandit last year. My emergency savings fund has earned less than 1% in the past year. My debt was relatively low interest, so my savings paled in comparison to the returns I could have enjoyed. In fact, the S&P 500 is up 75% from the lows it reached in March 2020 as of this writing.

Yet I don't regret those decisions for one second. I had no way of knowing that we were about to witness the fastest stock market recovery in history, or that I'd be one of the lucky ones who would hold onto their jobs. By wiping my debt balance clean, I also reduced the amount I need to have prepared for an emergency.

My life circumstances, not the stock market, will always be the primary driver of my investing decisions. My age, savings, job security, and retirement goals all matter more than what the stock market is doing.

It would've been great to max out my Roth IRA in March and earn unbelievable returns, but having solid savings and low expenses is the single best way I can protect my investments.

I worked hard in 2020 to reach the point where I'm financially secure enough to take every advantage in the next stock market crash. In 2021, I'm ready to pounce.