Author: Maria Alfano
You worked hard to get to this point in your life. And you have probably ridden a recession wave or two in your time. But, your finances don’t have to join the roller coaster ride. Take advantage of some of these super-smart and simple ways to recession-proof retirement funds and secure your future.
It’s hard enough to reach the end of the month with money in your pocket without the added pressure of outside influences impacting your finances. There is a smart way to recession-proof retirement funds without any added stress.
Top 3 Smartest Ways to Recession-Proof Your Retirement
I would love to tell you that you are immune to the current economic environment. However, there are ways to soften the blow and keep your retirement future a little safer. No one wants a repeat of what happened in 2008.
Can a recession affect my pension?
Most private or company pension plans are tied to the stock market. If the market goes up, generally, you can reap the rewards of the upwards trend. Conversely, when the market goes down, your pension fund can easily take a hit.
Depending on how close you are to withdrawing from your pension fund (at retirement), will depend on whether your nest egg can support the volatility.
What does a recession mean to your retirement?
For those at or near retirement, a recession together with inflation could mean a tightening of the belt to squeak through the tough times. It often helps to have a secondary form of income besides a company pension – like social security (or CPP in Canada) and perhaps a side hustle to keep you afloat.
Recession-Proof Retirement
There are steps you can take to protect or reduce the plunging value of your pension fund. Making sure you have recession-proof retirement monies will require some attention on your part. And, it is also important that you know how your personal portfolio is set up.
3 Top Tips to Protect Your Retirement
1 – Diversify – having a fund that contains 20-30 different stocks is key. Perhaps you were daring in your younger years and chose to put your money into high-risk, high-reward stocks. Now is the time to consider balancing your portfolio to include a mix of some old tried and true stocks that have been around forever along with the high-risk ones. Or, you can slowly transition your entire retirement fund to safe and steady stocks to reduce the risk of loss as much as possible. One thing is certain, we never know what the stock market will do from one day to the next and the only time you really lose is when you withdraw from your fund while the market is in a downturn.
2 – Insurance – whether it is life insurance, mortgage insurance, or medical insurance, these all go a long way to taking the bite out of expenses you may incur at retirement. Taking care of your health is costly in your older years. Medical bills are the last thing you want to have your children to inherit from you.
If you own your home, you might even consider a reverse mortgage to give you the extra money you need.
3 – Expenses – reduce any unnecessary expenses in advance of your retirement. Let’s face it, do you really need the premium TV package from your cable company? How about having a home phone and a mobile? Wouldn’t it be ok to have only a mobile? Who uses a home phone these days anyways? There are so many other ways to reduce expenses. Try switching to LED light bulbs instead of incandescent to lower your electric bill. Keep your car in good repair and have regular maintenance to avoid major breakdowns. Limit visits to your favorite restaurant to special occasions only. By the way – every Saturday night is not a special occasion:-)
In Summary
Investing your money is easy with work savings plans. But, taking care of your investment can be tricky and is all up to you. Recession-proof retirement plans may be a novel idea to some. But, financial planners all over the world know how to help you make smarter choices for your money.
We would love to hear from you. What have you done to recession-proof your retirement?
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All photos from Canva.com