There has been a lot of chatter recently by economists and news outlets using the word “recession”.
Understanding that it could happen and understanding how to handle it are different matters. If you
are one of those nearing retirement or in retirement that have no strategy, you may be right to worry.
Planning for a recession involves making a plan for other financial eventualities. If you prepare, you
can face the future with more confidence. When the threat of a recession exists, recall there are two
retirement variables within our control. How long we work and how much we save. Within this
framework, there are several other things to consider about recessions and retirement.
The first point to remember is live within your means. Depending upon your lifestyle going into the
recession, it might require preparation and practice. Spending as much as your income needs to stop.
This may require figuring out exactly where your money goes. When you know this, easier to trim your
budget. Less spending might not be fun, but spending is always in your control. This is important as
you head into a recession and your income will be less.
A second element is to potentially reduce your budget. Once you have trimmed the obvious low
hanging fruit, you can focus on bigger ways to reduce your spending if need be. You need not make
these bigger cuts now. For instance, could you cut out your Starbucks excursions once per week? Twice
per week? Could you also cut other nonessential services such as eating out or that new television or
entertainment center? Could you lower transportation expenses? These will no doubt require sacrifice.
Ensure that your spouse or other partner agrees and will work with you.
A third item to remember during or to prepare for a recession is to devise a plan to accumulate cash
reserves. The point of building up cash reserves is to keep you from having to liquidate your stocks. I
am sure we can all recall the advice of well-meaning investment planners: have an emergency stash
with several months of expenses. This stash should carry us through losing our job or another financial
emergency. In retirement, more cash reserves are necessary to ensure against an economic downturn.
Remember that regardless of what financial markets do, you still have the responsibility of food,
housing, transportation, and healthcare. You do not want to decrease your savings and outlive your
A fourth point to remember is patience with the market. It is tough to see losses on paper. But,
remember that the loss is only on paper and that it is not gone until you withdraw it. Realize that the
market comes back, so if you sell, you will not see the benefits of the recovery. Know the market is
cyclical and will (eventually) recover.
A fifth factor to consider is to work longer, or get a part-time position. Crunch the numbers and
determine what benefits you could receive if you worked a year or two longer. Consider that any work
you do before/in retirement increases your retirement money.
Last, consider that an annuity combats recession. Annuities are referred to as “protected lifetime
income”. Annuities are insurance that pays a set amount regardless of the market’s performance.
Annuities can also give comfort because one can keep his/her current lifestyle through their life
We are here to help you plan for your retirement, regardless of the market or economy. Let’s focus
on your savings and your goals.
The opinions voiced are for general information only and are not intended to provide specific
advice or recommendations for any individual.