In today's uncertain market, you may wonder if your financial plan is on track and if it's okay to retire. To help you successfully navigate retirement decisions, here are five recession-resistant strategies that can create the confidence to weather a potential recession. - Keep Appropriate Emergency Funds. Adjust emergency savings for increasing costs of family needs and lifestyle – for pre-retirees, possibly long periods of unemployment – that may come with a recession. Have cash assets ready in high-yield cash accounts, or via a security-backed line of credit (SBLOC) so valuable investments will not need to be liquidated for unplanned expenses.
- Set a Realistic Budget. Review the retirement budget and balance additional safety nets, like increasing retirement contributions and emergency funds. With an uncertain economy, now is an optimal time to trim expenses and increase retirement contributions while the market is lower, buying more for less.
- Complete a Family Preparedness Kit. Make sure finances are in order. Consolidate where it makes sense and holistically view savings, debt, retirement, Social Security, hard assets, etc., and discuss with the family.
- Prepare for All Scenarios. Pre-retirees should plan for all scenarios, including layoffs. Look for new ways to diversify income or pick up a new skill. Working clients should also contribute more to retirement plans and build up their emergency savings for unexpected expenses.
- Avoid Emotional Decisions. In an uncertain market, moving money to more conservative positions can be tempting. Instead, explore increasing retirement contributions to take advantage of dollar cost averaging – when retirement plans to purchase shares at regular intervals while the market is low, putting funds in a better position when the market rebounds.
While we can't determine what the future will hold, we know a recession can cause significant financial stress from job loss, reduced income, and increased debt. By preparing and taking proactive steps, you can mitigate the impact of a potential recession on your financial health.
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