To say that the last few months have been a wild ride for investors would be an understatement. The year started out with one of the stock market's worst quarters in history, and investors watched their savings plummet essentially overnight. But the market recently began to rally, and the S&P 500 actually recovered its losses and turned positive for the year.
That doesn't mean we're in the clear just yet, however, as stock prices took another fall following the incredible comeback. These are still volatile times for the stock market, which can be stressful when you're planning for retirement.
It can be tempting to press pause on saving for retirement, at least until the market stabilizes. However, that could be an incredibly dangerous move. The safest way to keep your retirement plans on track is to keep investing even when the stock market is on shaky ground.
Saving for retirement when the future is uncertain
Although the recent stock market rally suggests investors are optimistic about the future, nobody knows what will happen. The U.S. officially entered a recession in February, according to the National Bureau of Economic Research, and roughly 21 million Americans were still unemployed by the end of May. Another stock market crash could be on the way, and that will affect your retirement investments.
All these ups and downs can be unsettling, but keep in mind that saving for retirement is playing the long game. Your investments may take a hit in the short-term, but you don't actually lose money until you pull your cash out of the stock market. If you still have years to go before you retire, that's a lot of time for your investments to recover.
For that reason, one of the best things you can do to keep your retirement on track is to stay the course and keep investing. The stock market may be volatile now, but historically the market has always stabilized itself and bounced back after each downturn. Recessions are actually one of the best times to invest, because when stock prices are lower you can get more for your money. Then when the market inevitably recovers and stock prices skyrocket in value, you'll see significant investment gains.
If you press pause on saving for retirement, you're not only missing out on the opportunity to buy when stock prices are lower, but you're also losing valuable time. Although saving for retirement takes decades, that's not very much time when you need to save hundreds of thousands of dollars (or more). Every year counts, and if you hold off on investing right now, you can't get the time back later.
What if you can't afford to invest right now?
It should be mentioned that although investing consistently is the best way to keep your retirement plans on track, not everyone should be investing in the stock market right now. Millions of Americans have lost their jobs and are stretching every dollar, so saving for retirement may not be your first priority at the moment.
Before you invest, make sure you have a steady source of income and a healthy stash of emergency savings. If you're currently unemployed or are worried your job is at risk, it might be best to focus on keeping your emergency fund well-stocked. Pulling your money out of the stock market is usually not advised, because it can result in hefty fees and taxes. So before you invest any cash in your retirement account, make sure you won't need that money for the foreseeable future.
If you can't afford to invest right now, try your best to start investing as soon as you can. Again, your savings need as much time as possible to grow, and the longer you hold off on investing, the harder you'll need to work later to catch up.
The stock market has seen its fair share of ups and downs over the years, but the coronavirus pandemic has caused one of the wildest rides yet. Try not to let this rollercoaster rattle you, though. By continuing to invest no matter how volatile the market is, you can ensure your retirement plans stay on track.