How To Prepare For Retirement During A Recession

It’s natural to worry when the word recession hits the news. Inflation is persistent and the Fed keeps raising rates, leaving the market volatile – which can put a strain on retirement planning. Nobody can control what happens in the economy, but you can prepare your finances and plan ahead.

Prepare an investment strategy

During a recession or any other time, it’s important to have a sound investment strategy. Whether you invest alone or with the help of a financial advisor or wealth manager, an investment strategy can provide you with guidance during market volatility so you have a strategic plan to refer to in uncertain times. Your investment strategy should be based on an investment philosophy that reflects your personal beliefs and ideally is backed by scientific research so that you can use these core principles to guide your investment decisions.

You should write down your investment strategy for reference and repeatability in the future. One benefit of an investment strategy is that it helps you keep your own biases and emotions in check. When markets are turbulent it’s natural to bring your own emotions into play, but by relying on your investment strategy you can override your emotional responses so that you make investment decisions with a rational mindset.

Patience is important

If you’re nearing retirement and still contributing to your retirement accounts when there’s talk of a recession, you might be tempted to stop contributing, but now isn’t the time to deviate from your plan. Try to be patient wherever you are in the retirement process. Investing is a long-term process and markets have historically been volatile, but we also see them recovering.

Make the most of your current financial situation

Look at your current financial picture and optimize what you can. Take a close look at any big upcoming expenses to make sure you take care of them before you retire and rely on retirement income, and determine what you might be able to skip entirely.

Make money with your money – is it in a high-yield savings account, for example? When volatility is low, you may want to put extra money to pay off debt or take extra vacations — during times of volatility or recession, skip the extra payments and instead put those monies in emergency savings accounts until those accounts are fully funded . And as always, working with a financial planner can help instill financial confidence as they can create financial plans and forecasts for you in various scenarios.

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