Five Tips to Help Protect Your Retirement Savings in an Economic Downturn
You Have More Power Than You Realize to Keep Your Finances on Track
The COVID-19 pandemic and ensuing economic turmoil have caused many people to reexamine their finances. Even if you have taken control of your financial future by being diligent about saving for retirement, it’s normal to feel out of control when facing an uncertain economy and the prospect of a recession that may last for some time.
So, how can you shield your retirement portfolio in troubling times? Luckily, you have more power than you realize when it comes to recession-proofing your nest egg. These five tips will help you stay on track even in an economic downturn.
Tip #1: Bulk Up Your Savings
The typical rule of thumb is to maintain an emergency fund with three to six months of living expenses, but an economic downturn could last longer than that. Aim to up your cash reserves to one year’s worth of expenses and utilize a high-yield savings account to maximize your efforts. Doing so can give you greater peace of mind when unpredictable financial events happen.
Tip #2: Delay Claiming Social Security Benefits
If you’re not yet claiming Social Security benefits, stay the course. Social Security is guaranteed income for life, regardless of the health of the economy and regardless of how long you live. So, it’s smart to maximize this income stream in case your personal savings don’t go as far as you had hoped in an uncertain economy. The best way to do this is to delay claiming your benefits until age 70. Here’s why:
Although you can begin claiming Social Security benefits at age 62, waiting for longer means greater monthly payouts. For example, let’s say you retire at age 62 and begin collecting Social Security at a benefit of $1,050 per month. If you wait until age 67, you’ll receive a 30 percent greater benefit, at $1,500 per month. If you have the patience to wait until age 70, you’ll receive your full benefit amount, plus an additional 24 percent – $1,860 in this example. If you’re concerned about the health of your retirement investments, the decision to delay claiming Social Security can make a meaningful difference.
Tip #3: Utilize Guaranteed Income Sources
If you want your retirement savings to be recession-proof, take advantage of guaranteed income sources that won’t be impacted by a volatile market. Having a cash reserve means you can ride out a recession while having a sense of security from an income stream you can continue to rely on.
Common examples of these types of guaranteed income streams include annuities and pensions, but permanent life insurance is also an option. It has a cash value that grows over time, making it a great way to fund a cash reserve that you can rely on in a down market. Having cash on hand protects you from having to sell at a loss in an economic downturn.
Tip #4: Never Underestimate Diversification
Although there is an inherent risk in the market, it’s still important to manage that risk. Proper diversification allows you to lower your overall risk and keep your portfolio healthy regardless of the economic climate. Essentially, this means building checks and balances into your portfolio. Choose a mix of stocks, bonds and cash as a first step, then think about having a mix of different sectors and asset classes in your portfolio, too.
Tip #5: Find a Trusted Financial Advisor
It’s always useful to work with an expert, but having a financial advisor on your team during uncertain economic times is your best bet for protecting your retirement savings. If you’ve been going it alone thus far, consider that finding a trusted advisor means further preparing to protect your nest egg in the best and worst of times. The best financial advisors take the time to learn and understand your goals, which allows them to guide you and present options that best serve your individual needs. Together, you can assemble a strong financial plan that will allow you to weather any storm.
If you’re ready to learn more about recession-proofing your retirement savings with the help of a financial advisor, let’s start a conversation today. As recent times have shown, we never quite know what the future holds. Preparing a solid financial plan is the best way to protect your hard-earned savings and safeguard the comfortable retirement lifestyle you deserve.
All information provided is for general education, information, and entertainment purposes and is not intended to give you specific tax, investment, real estate, legal, estate, retirement, or financial advice, but rather to serve as an educational platform to deliver information of how these principles generally may apply; nor is it intended to show you how the strategies presented can specifically apply to your own tax, investment, estate, financial, or retirement position, and does not constitute an offer for solicitation for the sale or purchase of any securities, investments, investment strategies, or insurance products. This data is furnished with the understanding that the show and presenters are not engaged in rendering you legal, real estate, accounting, estate, investment, tax, financial, retirement, or other professional advice or services through this program. Nothing is directly or indirectly guaranteed by this information.
All research information provided is public source material. This material may also include additional references to articles, news, commentary, opinions, viewpoints, analyses, and other information developed by Peak Financial Freedom Group and/or affiliated and/or unaffiliated third parties, which is subject to change at any time without notice. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Peak Financial Freedom Group and its affiliates are not responsible for errors or omissions in the material and do not necessarily approve of or endorsed the information provided. This information is provided “as is” and no party makes any representations or warranties of any kind either express or implied, with respect to this information. Peak Financial Freedom Group, LLC and its affiliates do not warrant the information provided to be correct, complete, accurate or timely, and is not responsible for any errors or omissions in the information or any investment decisions, damages, or other losses resulting from, or related to, use of said information. The ideas, thoughts, and strategies presented here are those of our management teams and provide an insight into our views on Peak Financial Freedom Group, LLC, and its affiliates. Every detail presented here is subject to change without notice at any time.
