What’s Your Plan for A Recession? Asset Strategy

There are fears about a recession on the horizon for the US, and you may be wondering how that could affect your retirement plans.[1] You might need to adapt your retirement strategies if you are going to retire during a recession.

Why are there fears of a recession? Firstly, inflation.[1] Inflation has been a hot topic for more than a year now. Prices rose very quickly during the pandemic years because of various economic stimulation policies designed to keep our economy moving and due to supply shortages as a result of the war in Ukraine.[2] In order to counteract inflation, the Federal Reserve increases the federal fund rate, which makes borrowing for loans more costly.[3] This reduces economic growth and slows inflation.[3] Slow inflation is the goal, but the Federal Reserve acts with caution to avoid slowing the economy so much that we tip into a recession.[3] Current interest rates are high in an attempt to combat inflation, but some economists are taking this as a possible indicator of a coming recession.[1] Spending in both the business sector and the private sector can be hurt by these rate hikes, and it can take a while to fully see the effects of this.[1]

In addition to the issues with inflation, there have been concerns about the downward movements in the stock market and a slow increase in the GDP.[1] Earlier in 2023, economists were concerned because there was only a projected 1% increase in the GDP for the year, but the United States’ increase in GDP for the second quarter was 2.1% (what many believe to be a much healthier value).[1][4]

Whether or not a recession happens at the time you’re retiring isn’t up to you, but there are things that you can do to help mitigate the losses and financial difficulty that may arise.

For example, you can work part-time during your retirement. This can be a good way to supplement your income, and it may allow you to defer withdrawing from your retirement accounts and allow them to have the chance to recover from their losses. Another option for retiring during a recession is to purchase stocks and wait to see if they recover. Because the prices are especially low during a recession, it’s sometimes possible that you can make money once the recession ends.

These aren’t the only ways that you can plan around a recession. There are a myriad of financial strategies and retirement strategies that may help you weather the storm of a recession during retirement. A skilled financial professional can help you understand your options in the face of economic uncertainty, so reach out to us today for a complimentary review of your finances.

Frequently asked questions:

  1. Q: How might a recession affect my retirement plans? A: A recession can impact retirement plans by potentially reducing the value of retirement accounts, decreasing job opportunities for retirees, and affecting the overall economy, which may impact sources of retirement income such as Social Security and pensions.
  2. Q: What steps can I take to prepare for retiring during a recession? A: One strategy is to diversify your retirement portfolio to include assets that are less susceptible to economic downturns, such as bonds and stable dividend-paying stocks. Additionally, considering working part-time during retirement or delaying retirement to allow more time for your investments to recover can be prudent approaches.
  3. Q: How can a financial professional assist me in navigating retirement during uncertain economic times? A: A financial professional can provide personalized advice tailored to your specific financial situation and retirement goals. They can help you assess the potential impact of a recession on your retirement savings, develop contingency plans, and adjust your investment strategy accordingly to help protect and grow your wealth.
[1] https://www.forbes.com/advisor/investing/is-a-recession-coming/
[2] https://www.cnbc.com/2023/10/12/getting-to-2percent-inflation-wont-be-easy-this-is-what-will-need-to-happen-and-it-might-not-be-pretty.html
[3] https://www.investopedia.com/terms/i/inflation.asp
[4] https://www.investopedia.com/terms/g/gdp.asp

Because investor situations and objectives vary this information is not intended to indicate that an investment is appropriate for or is being recommended to any individual investor.

This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstances.

Advisory services offered through Asset Strategy Advisors, LLC (ASA). Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Insurance offered through Asset Strategy Financial Group, Inc. (ASFG). ASFG and ASA are independent of CIS.

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