Basic Retirement Planning Strategies: Recession Proof Your Retirement

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Planning for Your Retirement

The less emotion you use when planning for your retirement, the more success you’ll have. It’s very easy to get caught up in speculations and “can’t miss” opportunities when the market makes gains daily and your 401 (k) balance has steadily increased. It’s also easy to panic when the market drops and your Roth IRA is shrinking.

Be proactive and develop sound retirement planning strategies before a recession hits. After all, it’s better to recession-proof your retirement before the recession rather than after. The following strategies will help you avoid getting socked by the next recession and help you avoid further losses during this one.

Retirement Planning Strategies for a Recession

1. Educate yourself. Raise your hand if you blindly checked boxes on your 401 (k) enrollment form. Raise your hand if you never even read it. How many of you have no idea what you own in your retirement accounts? The current recession has shown that planning for retirement is more complex than you may have been led to believe. It, therefore, behooves one to spend more time planning for your retirement than planning for your next vacation.

2. Keep a percentage equal to your age in safe investments–cds, money market accounts, government bonds as opposed to stocks, ETFs, and mutual funds. The closer you get to retirement the less time you have to recover from an economic downturn. If you’re 25 right now, you’ve nothing to worry about in regards to planning for your retirement (assuming you have a plan). If you’re 50 and experienced a 45% drop in your investments, start worrying. Too many Americans had too high a percentage of their investments in the stock market. If a fifty year old had 50% of his investments outside of the stock market in 2008, his financial pain would have been far less than a fifty-year old highly invested in stocks.

3. Rebalance your portfolio annually. Pick a date–your anniversary, your birthday, the day after the Super Bowl. Make that day Retirement Planning Day every year. Go over your assets. Evaluate where you’re invested. Make sure you have the right investment allocation–a certain percentage in stocks, a certain percentage in safe investments.

4. Stay the course. I understand that bailouts are the hottest thing in finances these days, but that doesn’t mean you should do it. A steady investment program will always win out in time. Stocks are lower now than they’ve been in over a decade. Take advantage by buying them on sale.

5. Manage debt. Most planning for retirement tools assume you will have little debt when you retire. Please don’t let this assumption make you look like an ass. Find out when your home will be paid off. Accelerate payments if necessary. Reduce consumer debt, pay off credit cards and use the money you paid on those to finance your retirement.