- Live within your means. Depending upon your lifestyle going into the recession, this might require preparation and practice. The first step is to find out where your money goes. Are you spending the same amount, or more, of your income? This may require looking at exactly where your money goes. It will be easier to trim your budget with this information. Less spending might not be fun, but spending is always in your control. This can be especially important if you head into a recession early in retirement while still adjusting to changes in your income.
- Reduce your budget. Once you have trimmed the obvious low hanging fruit, you can focus on bigger ways to reduce your spending if need be. You may not need to make these bigger cuts now. For instance, could you cut out your Starbucks excursions once per week? Twice per week? Could you also cut out other non-essentials, such as eating out or buying that new television or entertainment center? Could you decrease transportation expenses? If you are married, remember to work on these changes together with your spouse. Small sacrifices over time will snowball into bigger savings down the road.
- Devise a plan to help cash reserves. The point of building up cash reserves is to help prevent liquidating investments early. Have an emergency cash stash with several months of expenses. This stash should be enough to carry you through losing your job or another financial emergency. More cash reserves may be necessary during retirement to help against an economic downturn. Remember that regardless of what financial markets do, you still have the responsibility of food, housing, transportation, and healthcare. Proper planning can help avoid drawing down your investment accounts by having adequate cash reserves.
- Be patient with the market. It is tough to see losses on paper. But, remember that the loss is only on paper until you withdraw it. The market always bounces back, so if you sell, you will not see the benefits of the recovery. The market is cyclical and will (eventually) recover.
- Evaluate the benefit of working. Work a few extra years before retirement, or work a part-time position in retirement. What would be the actual benefit of continuing to work or part-time work? Do you need the extra money, or is your plan sufficient without it?
- Consider protecting a portion of your savings. An annuity can help combat recession. Annuities may be referred to as “protected lifetime income”.
Remember that saving for retirement and planning for retirement are two different things – especially when it comes to recession planning.
Ready to Take The Next Step?
For more information about any of the products and services listed here, schedule a meeting today or register to attend a seminar.