If you’re finally ready to retire, but the economy is facing a recession, now is not the time to panic. Recessions typically consist of periods of negative GDP, combined with slowing economic growth, which can mean layoffs and a volatile stock market. For someone who is retiring, although the possibility of losing their job may not have much impact (since you will no longer be working), the possibility of your investments reaching volatility when you depend on them for income may be anxiety-provoking to say the least.
How to Manage Retirement During a Recession
How you manage your retirement during a recession really depends on your personal circumstances, finances, and desires, not to mention the state of the economy and expectations of the recession. Some recessions can be deeper and last longer than others, while others can be relatively short and shallow, with much of the market pain not even felt during the actual recession.
By the time you retired or started the retirement process, you should have a financial plan in place. This plan should have hopefully prepared you for several potential outcomes that could occur in the economy during your retirement.
If you didn’t have a good financial plan, or if you’re otherwise feeling unprepared or overwhelmed, there are still things you can do to prepare for retirement during a recession.
Keep making money
One option is to keep making money, so you don’t have to rely on your investment accounts yet. It could look like a part-time job or freelance work, or a side hustle in a field you’ve always wanted to try. Obviously, a lot depends on your own situation and your health and what you are physically and emotionally capable of. Working part-time or in some form can allow you to put off taking Social Security, allowing those checks to get bigger when you finally take them. The amount of time you keep working to some degree and let your investments withstand volatility might be what you need to feel better about retirement.
Diversify and don’t try to time the market
Staying diversified is good general investment advice, and it’s especially timely when the country is in a recession. If you’re not sure you can do this yourself, a financial advisor can help you make sure your portfolio is sufficiently diversified based on your goals and risk tolerance. It’s also important that you don’t try to time the market – if you sell while you’re panicking about a recession, you may miss a market rebound where your investments could have made money. It’s hard to stay impartial and unemotional when it comes to your investments and your retirement, but it’s necessary, and again, it’s an area where professionals like financial advisors can help you manage your emotions.
keep a cool head
Checking your portfolio every day doesn’t do you any good – after all, you don’t check the value of your home every day or other long-term investments every day. Avoid scary headlines designed to sell, as they can trigger emotional investment decisions that aren’t based on your plan and financial goals. If you fear a recession, there are steps you can take by going over your budget and eliminating unnecessary subscriptions or things you don’t need, cutting back where you can, delaying major purchases when possible, or even while earning extra income. to ease your tension until the economy rebounds.
Retiring during a recession can seem daunting, but it’s something you can accomplish with a good financial plan. Working with a financial advisor can help you get there if you’re struggling on your own.