Your Checklist for a Recession-Ready Retirement

May 9, 2023

Lately, we’ve been seeing trends in the market that point towards a possible recession on the horizon, and you may be wondering what that means for you. There’s no way to know exactly what is in store for the future, but here are a few simple ways you can prepare your retirement for a recession:

  1. Build up your savings and reduce debt.

There’s a reason this piece of advice has aged so well: it works! While it does require discipline and a thrifty pocket, try putting this into practice by building up emergency savings of at least a month’s worth of income (two if you have a large family), and then begin paying off your debt, starting with the smallest amount or the debt with the highest interest. After that, save up 3-6 months’ worth of savings outside of your mortgage.

  • Reduce spending and live within your means.

If the pandemic taught us anything, it’s how much money we save when we stay at home. By cutting down on small purchases, you can save up a hefty sum over time. Try spending 15 minutes every month looking for areas where you can make spending cuts. Additionally, creating a true and strict budget can help you see how to get the most out of each dollar and locate the areas where you’ve been living beyond your means.

  • Diversify and rebalance your portfolio.

Your portfolio should be balanced differently now than when you first started your career because two things have changed since then: time and goals. Early in your career, it can work to ride out the market because there is more time to recoup losses. In the years leading up to retirement, it is much harder to recoup losses with so little time. This is also a good time to diversify your assets and make sure not all your eggs are in one basket.

  • Don’t panic; establish your risk tolerance and think long-term.

When you have investments in the stock market, it’s easy to react emotionally during a market downturn and make aggressive changes during market upturns. It’s important to know how far your risk tolerance can go, and a financial advisor can help you determine that and create a plan for when the market steps outside your risk boundaries. Having a set plan in place to follow can help prevent any emotional investing decisions.

  • Consider alternative protection options for retirement.

There are many ways to protect the money you’ve worked hard for, and while most Americans don’t have pensions in retirement, creating a similar, more stable source of income is a smart move. Some options include annuities, Social Security, savings accounts, and life insurance with cash values. With these income sources, you’ll know exactly what income will be coming in without being negatively affected by market changes.

These simple steps can help your retirement withstand a recession, and we’d love to discuss in further depth with you how to protect what you’ve worked hard for!


Corey Hodges

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