If you’re getting close to retirement age – even if it’s a few years down the road – you’re likely a bit nervous about your retirement funds as well as your overall budget. Recent drops in the market have put a dent in most retirement accounts, and the news is full of talk of recession, which many fear will make the market even more volatile.
What is a Recession?
A recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in the gross domestic product (GDP) in two successive quarters. In 2022, economists have predicted that high rates of inflation, rising interest rates (which the Fed often raises to try and combat recession), volatile economic activity, and yo-yo financial markets mean that the U.S. economy is at risk of entering a recession. Still, economists have mixed views on the likelihood that a recession is imminent.
Preparing for a Recession
With economists differing on the subject of a potential recession, it’s still wise to prepare your retirement accounts for the possibility, particularly if you’re hoping to retire in the next few years. While you shouldn’t panic and do anything drastic, there are some wise steps you can take to provide a cushion to your retirement nest egg and your overall financial health.
These tips include:
Save money. In the event of a job loss related to the recession, it’s a good idea to ensure you have cash on hand to pay for several months of home and living expenses. And with interest rates on the rise, you will likely get more from your savings than you would have in previous years. Having a cushion will prevent you from having to consider tapping your retirement funds early.
Consider buying stocks. Now is the time to go shopping for bargains. Experts recommend you stay away from volatile stocks and look for companies with products that are fairly recession-proof, like those related to staple foods, household cleaning products, and other humdrum but necessary items.
Switch to safer investments. If you’d like to avoid the volatility of stocks altogether, consider switching to safe investments like fixed annuities and bonds. Whatever type of investments you choose, ensure you’re properly diversified so your funds are spread out in a way that protects your money.
Cut back on expenses. Chances are good you have a variety of non-necessary expenses that may be costing you more than you know. These include subscription services, streaming video, home services, meals out, and other things you might be able to do with less until the economy is on safer ground.
Consult a Professional
A professional financial services firm can help you make sure your budget and your investments are on track to weather a recession. Arizona-based Prime Wealth Advisors is a full-service tax, retirement planning, estate, and wealth management firm that can take the guesswork out of filing your taxes. Call 623.77.PRIME or visit our website for more information.