How to Recession-Proof Your Retirement Savings
1. STAY IN THE MARKET
Investing in the stock market always comes with a measure of risk. In exchange, over time you’re typically rewarded with higher returns than those you’d get from savings accounts, CDs and the like. But sometimes the market dips, and your portfolio takes a hit.
So should you get out when the market drops? Probably not in most cases, “People are living longer than they ever have before, so you need your money to last a long time,” . Keeping your assets invested can help you beat inflation and enjoy the unique financial growth that can come from investing.
2. MAKE SURE YOU’RE REBALANCING
Through your life, you’ll want a mix of riskier assets for growth and safer assets for stability. “The closer you get to retirement, the less risky you usually want to be,”
But in addition to setting your asset allocation (your mix of risky and safe assets) and changing it as you get closer to retirement, you should also rebalance regularly. That’s because a long run of stock market returns can actually leave you taking more risk than you should.
3. GUARANTEE AT LEAST PART OF YOUR RETIREMENT INCOME
Utilizing guaranteed income sources, which are not impacted by market volatility, and accumulating a cash reserve can be smart ways to ride out a recession without serious loss. “You have something you know will be coming in every month, and know the amount won’t be impacted by the market,”
Pensions, annuities and Social Security are examples of stable sources of retirement income. If you’re on the verge of retirement, consider keeping enough cash in a risk-free location — like a savings account — to cover a couple years’ worth of expenses.
4. DIVERSIFY, DIVERSIFY, DIVERSIFY
“Without proper diversification, the market risk to your portfolio is a lot higher,”
5. WORK WITH AN EXPERT
Facing an uncertain market — especially as you close in on retirement — comes with high stakes. “But you don’t have to go it alone,”. We recommend working closely with a knowledgeable financial advisor.
A great advisor understands your financial goals and can guide you to options that truly fit your needs. After all, strong financial plan can prepare you for the ups and downs of the market to allow you to weather a recession and focus on what’s really important: enjoying your retirement.