8 Important Things You Should Do Before Retiring During a Recession

While you can still retire in a recession, you should tweak your plans to make your money last.

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Updated May 28, 2024
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After years of hard work, you’re finally ready to retire. But the economy’s been in flux for a while, and now you’re wondering if a recession could dry up your retirement fund overnight.

While a recession in 2023 isn’t a certainty, it’s fair to be concerned about how an economic crisis could impact your retirement savings. 

In all likelihood, you’ll still be able to retire even in the middle of a recession — but you’ll want to make these preparations first to avoid wasting money in retirement.

Pick up a side hustle

Snapic.PhotoProduct/Adobe Uber driver sitting in a car with female passenger

If you’re worried your retirement savings won’t go far enough on their own, consider supplementing your savings with a part-time job. Making money means you won’t have to dip into your retirement fund as early or as often as you’d have to otherwise.

Plus, in the gig economy, it’s easier than ever to find side hustles that dovetail perfectly with your time and interests. 

Freelance jobs like driving for Uber let you choose your own schedule, so you don’t have to completely table your dreams of enjoying a quiet, unbothered retirement.

Update your financial plans

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Ideally, you already have a financial plan in place for how you want to spend your money during retirement. And if you haven’t created a retirement budget yet, let this be your reminder to make one as soon as you can. 

If you’re worrying that a recession could throw a wrench into your plans, consider adjusting your retirement budget for challenging economic times. Running the actual numbers should show if you can afford to retire during a recession. 

If you learn that your savings account isn’t large enough to survive a recession, you can take steps to stay in the workforce longer, pick up a second job, or downsize sooner rather than later.

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Adjust your investment strategy

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The closer you get to retirement, the more important it becomes to invest in secure, stable stocks and fixed-income securities such as bonds, money market funds, and/or CDs instead of high-risk, high-reward stocks. 

If you had lost money on a high-risk investment early in your career, you had time to recover the funds. That’s not the case if you’re only a few months from retirement and need to start withdrawing funds.

Cultivate a diverse portfolio

Maksym Yemelyanov/Adobe newspaper and direction sign with investment options

It’s always important to have a diverse portfolio, but it’s critical to be sure your investments are well-diversified before a recession strikes. 

Even if one segment of the economy tanks, others will likely stay afloat. And if you hold a variety of stocks and bonds across a wide spectrum of industries, you’ll likely keep your head above water too.

Consider retiring later

Halfpoint/Adobe Senior grandmother with small granddaughter gardening on balcony

Drastic times call for drastic measures. While it’s definitely not ideal, you might want to consider pushing your retirement back a year or two. 

If you were trying to see if you can retire early, you may want to wait until you reach the minimum retirement age to leave the workforce instead of getting out early.

However, waiting even longer to retire could come with even more benefits. For instance, staying with your job means you’ll still have the security of a stable paycheck and company-sponsored health insurance. 

And if you delay taking Social Security benefits, you’ll also receive higher monthly payments when you do eventually retire, which can make a huge difference to your budget.

Get a head start on cutting back

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Many individuals plan to downsize once they retire, but if you’re worried about the future, it makes sense to start minimizing even earlier. 

Selling your home now or switching from a new car to a used one puts extra cash in your wallet while you still have a steady paycheck. This can takes some of the pressure off downsizing as your primary source of income.

Downsizing early also gives you more time to save. A smaller house means lower utility costs, and a used car should cost you less per month in car payments. You can put away the money you save for a rainy day.

Don’t give up on your investments

Engdao/Adobe Stock crash market exchange loss trading graph

A stock market crisis might make it tempting to pull all your investments and cash out early, but that’s almost always a bad idea. 

Calling it quits on investing means you won’t have the chance to recoup any funds you’ve lost, and your losses won’t have the time to turn into gains.

If you’re anxious about how a recession could impact your investments, don’t wait for the economy to crash to reassess your investment strategy. Talk to your financial advisor now so they can help you prepare for the future.

Start paying off debts

Anatoliy Karlyuk/Adobe young female sitting at desk with calculator and laptop holding pen and mug

Debt payments may be an annoyance now, but that’s nothing compared to how devastating they can be to your bottom line if you’re living on a fixed income during a recession. 

It’s hard to strike a balance between saving, spending, and paying down debts, but while you’re still employed, do what you can to get any high-interest debts paid off as quickly as possible.

Heading into retirement with minimal consumer debt removes a lot of strain from your budget. That’s doubly true during a purse-tightening period like a recession.

Bottom line

insta_photos/Adobe senior woman working at home at laptop

Remember, a recession doesn't really feel like a recession until the job market starts to suffer — and the job market is still on its feet for now. 

But when it comes to finances, it’s a good idea to hope for the best while you prepare for the worst

Taking the steps listed here can help your retirement funds weather any storm, even one as potentially destructive as another recession.

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Author Details

Michelle Smith

Michelle Smith has spent a decade writing for and about small businesses. She specializes in all things finance and has written for publications like G2 and SmallBizDaily. When she's not writing for work at her desk, you can usually find her writing for pleasure near large bodies of water.