9 retirement planning steps to take now if you’re worried about the economy

Planning for retirement can be a challenge. It’s hard to know exactly how much you’ll need to save and, perhaps more importantly, save enough in the first place. Several factors are working against us: the widespread disappearance of retirement plans, the rapidly rising cost of living, and the serious possibility that Social Security will run out in 2037.

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But wait, that’s not all: a recession may be on the horizon. While the Fed doesn’t expect this to happen soon, that doesn’t mean it won’t happen. As we’ve learned from the pandemic that sent the economy plummeting and all jobs cut, this can happen at any time and cause many people to stop saving for retirement or, when faced with hardship, withdraw from their retirement plans.

We must always be prepared for a recession because it will happen sooner or later; this is the nature of our economy. So how can you plan for retirement while taking care of the economy?

Increase your emergency fund

If you’re worried about an upcoming recession, increase your emergency fund (this is actually a smart move, even if you’re NO fear of deterioration of the economic situation). Dre Villeroy, CEO of Beyorch, recommends setting aside about six months of living expenses in an easily accessible account (preferably a high-yield savings account).

Re-evaluate your retirement timeline

The rather unfortunate truth is that you may have to delay retirement if the economy worsens.

“A recession can significantly impact your retirement plans, so it’s important to re-evaluate your schedule and make any necessary adjustments,” said Michael Collins, CFA, founder and CEO of WinCap Financial. “You may need to delay retirement or save more aggressively to weather the storm.”

Take advantage of refills

Time is of the essence for all of us, no matter what our age, but if you’re over 50, you should be especially aggressive with your retirement planning strategy.

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“If you’re over 50, you can make additional contributions to your retirement accounts, such as a 401(k) or IRA,” Collins said. “These higher contribution limits could help boost retirement savings in the years leading up to a recession.”

Diversify your portfolio

Hedge risk and protect your retirement savings from the full effects of a recession with a well-diversified portfolio.

“This means investing in a mix of stocks, bonds and other assets to spread risk,” Collins said.

Consider a more conservative investment strategy (if you are close to retirement)

Retirement planning is not one-size-fits-all, although some recommendations apply to everyone. Make key investment moves depending on where you are in life and how long you plan to work.

“As you get closer to retirement, it may make sense to change your investment strategy to a more conservative one,” Collins said. “This means limiting exposure to riskier investments and focusing on more stable options such as bonds or cash.”

Pay off high-interest debt

Millions of Americans are carrying a burden of debt, destroying their savings and leaving them financially insecure. Pay it now.

“If you have high-interest debt, like credit card debt, try to pay it off before the recession hits,” Collins said. “This will allow a greater portion of income to be allocated to retirement savings.”

Consider downsizing

Many retired people reduce their earnings. Why not go ahead and do this before the momentous change?

“If you’re getting close to retirement and have a larger home or an expensive car, consider downsizing to reduce expenses,” Collins said. “This could free up extra money that can be put towards savings and help weather the recession.”

Explore alternative sources of income

“You can also explore alternative sources of income, such as starting a side business or investing in rental properties, which can provide additional financial security,” Villeroy said. “There are many opportunities that require very little investment and offer high returns.”

Consult your financial advisor

You don’t have to do it all yourself, and if you work one-on-one with an expert, you’ll be in a better position.

“A financial advisor can provide expert guidance on how to prepare for a recession and protect your retirement savings,” Collins said. “They can also help you create a tailored retirement plan that takes into account your specific goals and risk tolerance.”

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