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7 Questions to Ask if You’re Planning to Retire During a Recession

The average American will choose to retire at the age of 66 and live to the age of 79. Are you dreaming of your retirement days? Of not doing the 9 to 5 and not punching the clock?

For many, you’ll spend most of your working years planning for the day you can retire too. But what if that day comes during a recession?

Is it smart to retire during a recession? Should you keep working, postponing retirement plans, to save more money?

Read on to learn what you should consider if you want to retire during a recession.

  1. How Will Your Age Impact Your Situation?

Age is a factor for a number of reasons. The earlier you retire, the more funds you need for your retirement years.  As stated above, the average retiree lives to age 79. You could live much longer and need money for years beyond 79.

If you are considering retiring before you are eligible or plan to apply for social security, you will be using a greater amount of your actual retirement funds.

The other big consideration with age is health care. If you retire before you apply for social security, you will need to secure health care and that can be costly.

Even if you are applying for social security at retirement and getting Medicare, you want to plan for the costs of supplemental insurance.

  1. What Lifestyle Demands Do You Have on Retirement Funds?

You might have big dreams about how you are going to spend your retirement. Your lifestyle and the finances you will need to cover it will be a factor in when to retire.

Successful retirement usually equates to monitoring and controlling your spending so your money lasts and you can live within the means you planned for while saving.

  1. What Are Your Sources of Income?

In retirement, you may have two or three sources of income.

The first source will be those fixed income sources like social security and pension income.

There is also potential non-fixed income from your retirement savings. This would be where you would see the impact of a recession because those funds might be down if they are in investments.

You will need to carefully consider how much, if any money, you will need to pull from those investments to sustain yourself and consider if you have enough money saved.

Finally, many people choose to retire from their career job and then pursue a part-time job to fill up some of their time. Some want to retire and never work again, while others enjoy the opportunity to get out of the house for a few hours a week.

  1. How Much Will You Need from Retirement Savings?

As you plan for potential retirement and consider whether you have enough money in a recession, you’ve probably heard the 4% rule.

This is the rule generally used by financial advisors and retirement nest eggs. It says you shouldn’t pull more than roughly 4% per year from your retirement savings.

So, if you have $300,000 in retirement savings, you should not be pulling out more than $12,000 per year. If you have no fixed income or not enough fixed income, consider how much you will need from those retirement savings as a guide to decide if this is the right time to enter retirement.

  1. Do You Need Social Security or Can You Delay?

Consider when you will need to file for social security. You can’t apply until the age of 62. If you retire before then, you will need retirement savings or a pension.

Once you are of retirement age, you need to consider the right age to apply. The longer you wait between the ages of 62 and 70, the higher your social security check will be.

If you can live on a pension and delay filing for social security, you will have a higher income later on to supplement the rest of your income.

  1. Do You Have a Solid Emergency Fund?

The strength of an income directly impacts your retirement investments. Taking money from your retirement savings during a recession is the worst time to need an influx of cash.

For this reason, you need to plan for emergencies. You should have a liquid cash fund you can access in case of an emergency so you don’t have to withdraw from retirement savings when the economy is sluggish.

  1. Is Your Retirement Savings in the Right Place for This Stage of Life?

It makes sense as a younger person to have your investments in stocks. They can provide you with a higher rate of return and in the end, grow your money more quickly. But this also makes them riskier.

How to invest money in retirement might be different. You probably want to have your money in less risky investments as you enter retirement age.

It’s hard to predict what will trigger a recession, coronavirus pandemic being a perfect example, so you want to consider where your money is invested as you decide on retirement.

Tips for Recession Proofing Your Retirement

As you make the decision about whether to retire in a recession, consider these important tips as part of your decision making.

  1. Research Medicare supplemental insurance costs and what they cover. This is an added expense in retirement.
  2. Remember, the longer you wait to seek social security benefits, the greater the monthly amount you will receive.
  3. Be prepared to adjust your monthly expenses to match all of your income sources during retirement.
  4. Become an expert on all things related to retirement and surround yourself with people who can help you make wise choices regarding money and insurance.

Recession or not, you want to make the best decisions considering the long term.

Are You Hoping to Retire During a Recession?

Deciding to take the leap into retirement is challenging whether you are deciding to retire during a recession or not.

It’s supposed to be such a happy and momentous time in your life, you want to be as well-informed as possible.

Contact us today for more guidance with your retirement investment decisions.


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