COVID-19 has taken the world by storm, and although life has begun to return to normal in some areas, the pandemic may not be over just yet.
The number of new coronavirus cases peaked in late April with a staggering 36,000 new infections in a single day. The number of new cases declined slightly through the month of May, but the country has experienced a spike in cases over the last few weeks, with the number of new daily infections surging past 32,000 in mid-June.
While the continued spread of COVID-19 could primarily affect your health, there's also a chance it could have an impact on your retirement. Here's how to plan for it.
COVID-19's effect on your retirement
Businesses across the country have started to reopen, and the stock market has been surging over the last few weeks. But there are no signs that the coronavirus pandemic is slowing down, and a second wave could have drastic effects on the U.S. economy.
If the number of COVID-19 infections continues to escalate, businesses may have to close their doors once again to mitigate the spread of the virus -- which could result in another round of mass layoffs. This could potentially rattle the stock market, causing stock prices to plummet while investors watch their portfolios take a nosedive.
Soon-to-be retirees could be particularly affected by a second stock market crash. If your investments have recently recouped their losses from earlier this year, you may be feeling confident about your ability to retire. Another market downturn, however, could throw off your retirement plans.
Not only could a second wave of COVID-19 have an impact on your investments, but it could also force you into an early retirement. If businesses are forced to lay off employees, your job could be at risk. And because finding another job during a pandemic could be nearly impossible, you may have no choice but to retire early, whether you're ready for it or not.
How to prepare for a second wave
Nobody knows what will happen in the future, but the number of coronavirus cases is steadily climbing, suggesting that this pandemic is far from over. In that case, it's a good idea to start taking precautions now.
One of the first things you can do is double-check that your investments are allocated properly for your age. If you're nearing retirement age, you should be investing more conservatively to protect your savings from a potential stock market crash. While you'll still want to invest some money in stocks, they should not make up the vast majority of your portfolio. This is especially important during a pandemic, because the market is volatile right now and could remain volatile for the foreseeable future.
Next, do everything you can to build a healthy emergency fund. If you do lose your job and you're not ready to retire just yet, an emergency fund can help make ends meet while you're out of work.
Even if you do choose to retire early, an emergency fund can still be beneficial. It's typically wise to avoid withdrawing from your retirement account during a market downturn, because that would mean selling your investments when stock prices are at their lowest -- and potentially losing money. When you have a robust stash of emergency savings, though, you can lean on that money and leave your retirement savings alone until the market recovers and stock prices bounce back.
Is a second wave on the way?
The future is uncertain, so nobody knows for sure when the coronavirus pandemic will end. But it's best to be prepared for anything, especially if you're nearing retirement age. By preparing your investments for a potential second stock market crash and building a strong emergency fund, you can ensure your finances are as ready as possible for whatever the future may have in store.