Because Social Security generally won't provide enough income for seniors to live comfortably, workers are advised to save independently for retirement in a 401(k) or IRA. Ideally, you should be socking away 15% to 20% of your salary for the future, and while many workers don't do that (namely, because they can't afford to), it's always better to save some amount of money for retirement than none at all.

But while the "always keep saving" mantra is a good one to follow, the COVID-19 crisis is forcing millions of Americans to rethink the idea of funneling money into an account they're not supposed to access for years. In fact, if the following situations apply to you, you may want to consider pulling the plug on your 401(k) or IRA contributions for now.

A mug of coffee sits next to a notebook labeled Retirement Savings Plan with eyeglasses, pen, and calculator on it.


1. You've lost your job or your income has gone down

As mentioned earlier, you should, ideally, allocate 15% to 20% of your paycheck to retirement. But if you don't have a paycheck, that rule goes out the window, and the same holds true if you still have a job but are earning less (say, because your hours were cut).

While workers who have lost their jobs are eligible for extra unemployment benefits right now -- specifically, an additional $600 a week on top of the weekly benefit they otherwise qualify for -- most will need every dollar they collect to keep up with their regular bills. (Those with reduced hours may be eligible for unemployment, too.) If that's the situation you're in, you're OK to hit pause on your retirement plan contributions for the time being and not feel badly about it.

And while you may be doing just fine with your unemployment income, to the point where you're tempted to put some money into an IRA, be careful -- you may find that certain expenses of yours climb in the coming weeks, like paying a premium for grocery delivery or higher utility bills because you're home. And not funding a retirement plan for a while is a better bet than racking up credit card debt because you contributed a little money toward your senior years but then couldn't pay a near-term bill.

2. You have a job, but no emergency savings

Pausing your retirement plan contributions may seem like a no-brainer when your income disappears or gets slashed, but what if you still have your regular paycheck? Many employees have the option to work from home during the ongoing crisis and, as such, aren't facing a drop in pay. If that's your situation, you may be inclined to keep contributing money toward retirement. But if you don't have a solid emergency fund, it actually makes a lot more sense to stop funding your 401(k) or IRA and put that extra money into a traditional savings account instead.

While it's noble to want to build a nest egg, remember that your near-term needs should take priority over all else. Your emergency fund should have enough money to pay for three to six months' worth of bills under normal circumstances. But unfortunately, right now, we're not looking at normal circumstances -- we're looking at a pandemic and, potentially, a full-fledged recession, so it pays to favor the higher end of that three-to-six month range, or even go beyond it.

Consistently contributing to a retirement plan is a good way to set yourself up for a financially secure future. But if you're unable to do so for the time being or you have to focus on emergency savings, don't feel bad about it. You can always plan to ramp up your contributions once you're employed again or your emergency savings balance reaches a more comfortable level.