Navigating the Financial Storm: How to Have a Recession-Ready Retirement

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1. Laying a Strong Foundation: Robust Plan and Healthy Emergency Fund

Every successful retirement strategy begins with a 'Robust Plan and a Healthy Emergency Fund'. Over the years, we've observed that the most successful retirees are meticulous planners. They carefully assess their income and expenses, set aside provisions for unexpected contingencies, and strictly adhere to their financial blueprint.

An integral component of this plan is the establishment and management of an emergency fund. This is a reserve of readily accessible cash intended for unexpected financial emergencies. Experts generally recommend having enough in this fund to cover three to six months' worth of living expenses.

In a recession, this emergency fund becomes a financial buoy, allowing you to handle unexpected expenses without dipping into your retirement savings.

2. Embrace Flexibility: Be Willing to Adjust

Our next crucial point is the willingness to 'Adjust'. Even the most thorough plan becomes outdated as soon as it's finalized. Economic downturns may require changes in income expectations, risk tolerance, or tax and estate planning strategies. Being open to these shifts can significantly alleviate financial stress during turbulent times.

For instance, if a recession affects your investment portfolio and reduces your returns, you may need to adapt your lifestyle to the reduced income. This could involve cutting down on luxury expenses or even downsizing your home.

Similarly, you might need to reassess your investment portfolio's risk levels or modify your estate planning tactics to comply with new tax laws. As the previous point suggests, a robust plan with an emergency fund should inherently include potential adjustments and trade-offs. Remember, flexibility is the key during a recession.

3. Err on the Side of Caution: Use Conservative Assumptions

Our third recommendation is to 'Use Conservative Assumptions', particularly when creating your initial retirement plan. Be modest in estimating your portfolio returns, annual withdrawals, and lifespan.

Take the sequence of returns risk, for example. This is the risk of lower or negative returns early in retirement when you start making withdrawals. Such occurrences can seriously impact the longevity of your savings. By assuming a modest rate of return, you're better equipped to manage such events.

As for life expectancy, consider that advancements in healthcare are enabling people to live longer than ever before. Planning for a longer retirement will help ensure that you don't outlive your savings.

4. Don't Put All Your Eggs in One Basket: Diversified Portfolio

The fourth point on our list is the need for a 'Diversified Portfolio'. The timeless wisdom, "Don't put all your eggs in one basket", is especially true when planning for retirement. A diversified portfolio can help buffer the impact of a market downturn.

Diversification isn't just about having a mix of investments like stocks, bonds, and real estate. It also involves diversifying your income sources, which could include Social Security, annuities, rental income, dividends from stocks, and interest from bonds.

These income sources behave differently under various market conditions. While one might take a hit during a recession, others could remain stable or even grow, helping maintain your overall income levels.

5. An Extra Lifeline: Consider Part-Time Work

Lastly, 'Consider Part-Time Work'. The harsh reality is, despite our best efforts, a recession could hit hard. If it does, part-time work can provide an extra source of income to navigate the stormy period.

Moreover, part-time work can provide a sense of purpose and engagement, helping you stay mentally and physically active. It might be something in your field of expertise or maybe it's time to turn a passion into a profitable side hustle.

Bear in mind, we must be prepared to retire at any time due to unforeseen circumstances - sudden layoffs, family emergencies, or an unexpected recession. By incorporating these strategies into your retirement planning, you'll be well-equipped to manage whatever comes your way.

In summary, preparing for a recession-ready retirement might seem like a daunting task, but by implementing these steps and maintaining discipline, you can navigate any economic landscape with confidence.

We hope you found this blog post useful. Please remember to share it with your friends who are planning for retirement. Until next time!

The commentary on this website reflects the personal opinions, viewpoints and analyses of the Ascend Investment Partners employees providing such comments, and should not be regarded as a description of advisory services provided by Kesler, Norman & Wride, LLC dba Ascend Investment Partners or performance returns of any Ascend Investment Partners Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Ascend Investment Partners manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. 

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