As the coronavirus-fueled economic crisis upends the stock market and unemployment claims top 40 million in just 10 weeks, people planning retirement are increasingly altering their plans.

Many workers planning retirement at the beginning of this year have now seen their 401K plans, IRAs and other investments hit by the two worst economic crises since the Great Depression — the Great Recession and the COVID-19 financial crisis.

“The stock market dropped in half during the Great Recession and the saddest thing I saw was people who were holding lots of riskier stocks, they may have seen 70 percent losses or something like that,” Chris Magnussen, a financial advisor with Insuractive, told RetireGuide.

Magnussen said “quite a few” of his clients were back to where they were within two years of the 2008 crisis.

The Great Recession is the only financial crisis in living memory that compares to the pandemic’s economic crash.

Financial advisors see people practicing lessons they learned after the market crash of 2008, looking for stability and ways to preserve their retirement investments.

“We’re seeing people moving to safer alternatives. I know we do a lot of indexed annuities that protects that downside,” Steve Rohrig, insurance expert and associate director of training at Senior Market Sales, told RetireGuide.

Differences Between COVID-19 and Great Recession

While some comparisons to the Great Recession are inevitable, it may not always be the best yardstick to use when measuring your retirement investment options.

For instance, the stock market dropped 40 percent during the Great Recession. By contrast, the S&P 500 has been rebounding, and by Memorial Day weekend was down just 14 percent from its all-time high from February.

“I don’t know if the stock market has gone down anywhere near to the extent it still might,” Magnussen said.

Comparing the two major financial crises is also complicated because they have very different underlying causes.

“The Great Recession was a result of financial imbalances — starting primarily in the housing sector. This one is from a totally external factor, the coronavirus disease [COVID-19],” Louise Sheiner, a senior fellow at the Brookings Institution, wrote in a March 2020 analysis comparing the two economic crises.

Because of that, Sheiner suggested the downturn could be shorter and shallower than the Great Recession. But she pointed out that we’re still in the early stages of this crisis and there’s still a lot of uncertainty.

At the same time, she wrote that reforms during the Great Recession have improved the chances of recovery.

“The post-2008 focus on promoting financial stability has left us in better shape to weather a downturn,” Sheiner wrote.

Financial advisors frequently suggest people should be cautious about changing retirement investment strategies during market downturns.

“It just really comes back to asking yourself, ‘Can you, at this time, stay the course?’ Is that an option for you?” Rohrig said. “The worst thing is to sell your assets at the bottom and lock in those losses while you give up potential for future gains.”

Retirement Security During the Pandemic Varies by Generation

A majority of people saving for retirement had still not recovered from the Great Recession when the coronavirus-related economic crisis hit, according to a 2020 survey by Transamerica Center for Retirement Studies.

As of May 2020, nearly a quarter — 23 percent — of employed and recently unemployed workers say their confidence in being able to retire comfortably had declined as a result of the COVID-19 pandemic.

The survey found that only about 47 percent of workers had either fully recovered or somewhat recovered from the 2008 economic downturn.

People were also relying on those savings to get through the current economic crisis. The survey found workers had only $5,000 in emergency savings on average.

Median total savings, including retirement savings, was just $50,000. The numbers suggest that people would quickly have to dig into retirement savings to get through the pandemic.

Median Total Savings by Generation

  • Baby Boomers: $144,000
  • Generation X: $64,000
  • Millennials: $23,000
  • All Generations: $50,000

“Unfortunately, sometimes people have to make difficult decisions that don’t make the best economic sense in the long run, but they may be in a bad situation for the time being,” Magnussen said. “You have to pay your house and car payments, your insurance, you’ve got to feed the kids.”

“But you need to think about the fact that there will be some long-term ramifications there,” Rohrig said.

People who did not withdraw from their retirement accounts during the Great Recession did better in maintaining their finances for retirement than those who did, Teresa Ghilarduci, an economics professor at The New School, wrote recently in Forbes.

Ghilarduci also suggests that those still working may benefit from adding stock to their retirement accounts during the pandemic. She wrote that stock market swings may have little impact on overall savings for those who resist the temptation to sell.

Riding out the Coronavirus Economic Crisis

Economic advice during a downturn is never certain, but there are some common pieces of advice that economists tend to recommend.

Common Suggestions for Saving During a Recession

  • Stay the Course: A downturn is about the worst time to pull money out of savings. It not only reduces your savings, but you’re also taking money out when your investments are at their lowest value.
  • Ignore Your Investment Balance: Besides causing anxiety, Ghilarduci says people who check their balance too often tend to buy high and sell low.
  • Increase Your Retirement Contributions: If the stock market is low, it’s a good time to increase your investments with a higher payout when you retire.

And whether you are in doubt or not, before making major retirement investment decisions, it’s always a good idea to talk to a professional financial advisor.