With slowing global growth, trade wars, and inverted yield curves, it seems everywhere you look someone is talking about a recession. In a world where economic depressions are a certainty, you need to make a plan.
Worryingly, all the talk on a recession isn’t going away. Recessions can be tough on everyone, but they can be especially difficult for people saving up for retirement — or trying to live through it. Recessions are part of normal economic cycles. When or how severe? No one knows for sure. But one thing you can be certain of is the power of a well-planned retirement.
Recession-Proof Your Retirement Savings
With some experts warning the next recession may arrive in the coming years, it’s understandable if you’re concerned. So how can you shield your retirement portfolio? Here, CKS Summit Group gives you four strategies to help protect your retirement in case of an economic downturn.
1. Save, Save, Save.
One way to prepare for any financial setback is to build on your savings and have an emergency savings account. It is recommended your emergency fund should have at least three months worth of cash. However, saving up only three months of living expenses is for someone who knows they can get employment fast…
But if you have a specialized job, it may be more difficult and take longer to find another position if you’re laid off. In that case, you should aim to put away more savings, up to one year’s worth to really cover your needs.
2. Develop a Financial Forecast.
Calculating the amount of cash you will need for each year of retirement can help you determine how much you should save. Since you’ll want your funds to last throughout your golden years, you might look at estimated withdrawals from a 401(k) and IRA as your new paychecks. These amounts, along with Social Security benefits and/or other retirement income, can be used to cover your everyday expenses. Setting a budget for retirement can help you avoid overspending, falling into/carrying over debt or depleting your savings.
To assist you in determining how much money you will need to retire comfortably, you may wish to access any number of helpful retirement calculators that are readily available free of charge online. Check out more on the best financial calculators for your retirement here.
3. Be Cautious with Spending.
To help secure your savings, you’ll have to take a look at your spending patterns and see what you can cut back on.
Examples include eating out less or holding off on that overseas vacation. You may also want to consider delaying big purchases like a car or home until the market picks back up. While this may not sound like what you had planned for, in order to survive a recession you need to be much more frugal.
You should also make an effort to stop purchasing on credit unless you pay your balance in full every month. Instead, pay in cash or with a debit card.
By cutting back on these expenses you can help yourself (and your pocket) further and pay down your credit card and other debt you have.
4. Diversity is Key.
Without proper diversification, the market risk to your portfolio maybe a lot higher. The aim of diversification is to keep your retirement portfolio healthy, regardless of what the market is doing.
Choosing a portfolio specifically structured to limit downside stock market risk allows protection of your assets (while providing you with strategies to achieve effective tax reduction and inflation protection). To help assist you in portfolio diversification, speaking to a great financial advisor that understands your financial goals can guide you to options that truly fit your retirement 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.
Final Thoughts
With a recession-proof plan, it doesn’t mean the recession won’t affect you. It means you know what to do when it comes along. If you’re anxious about market dips and recessions, call the experts at CKS Summit Group. Our focus is to bring you fresh new ideas for your retirement income. We create cutting edge tactical portfolios to help our clients achieve safe, healthy growth of their savings and preservation of their principal balance.
What’s more, every strategy session with CKS is complimentary. So get in touch online here or call us on 586-286-5820 today!
