Recessions are killer to retirements.
Do you remember 2008?
The recession hit many Americans hard.
That recession, like most, impacted those nearing or in retirement the most severely.
In fact, nearly $2.4 trillion disappeared from retirement funds for American almost overnight.
According to a recent Money article “This is the Best Way to Recession-Proof Your Retirement, According to Experts,” a similar situation in the future is not impossible.
In fact, future recessions should be expected.
Can you protect yourself in a downturn?
Do you look particularly fetching wearing a barrel and suspenders?
If no, you can certainly take steps to set yourself up to make it through without becoming destitute.
What are they?
Create a cushion.
How much should you save?
The commonly recommended amount is to have at least three to six months of expenses saved, preferably in cold hard cash or its equivalent.
Even if your retirement savings are large, removing money early to survive will incur penalties and decrease future gains.
Keep your emergency funds separate, yet accessible.
In retirement, you will be living on a more fixed income.
You do not want to deal with debt or creditors, especially in a recession.
Start paying down your debt now.
To prioritize, start with the highest interest rate debt.
You can cut discretionary expenses to pay make these payments.
Also, in a recession, you can opt not to pay for a vacation, but a mortgage payment must be paid.
If you do not believe me, just blow off the mortgage payment for a few months.
You will need the barrel and suspenders, if you do.
Consider tweaking your investment portfolio
Your investment needs will change as you near retirement.
The closer you get to retirement, the less exposure you will want to market volatility.
If you have unnecessary risk, get rid of it.
You may still need some stocks to out-pace inflation, but you do not want too much where the risks are greater than the rewards.
Working with an experienced financial advisor can help you adjust accordingly.
Apply for part time jobs.
Having a job can give purpose to your day.
It can also provide funds so you do not draw down retirement accounts more quickly than necessary.
Working may impact taxes and Social Security, so you may want to research the impact before you accept a job.
Set up an estate plan.
A recession is not an excuse to neglect estate planning.
The heavy financial burden of a recession will be made worse for your loved ones if you do not have your affairs in order.
Taking steps to protect yourself now will only help you later should a recession rear its ugly head.
Reference: Money (March 13, 2019) “This is the Best Way to Recession-Proof Your Retirement, According to Experts”