Learn Tips to Adjust Your Retirement Portfolio to Combat a Recession.
It is no secret that the US economy is not doing well. Economists are saying 2023 is not looking promising for financial success. As a matter of fact, the Conference Board predicts a 96% chance of the economy moving into a recession in 2023, while the National Association for Business Economics predicts a 50% chance of a recession.
As the result of these grim scenarios, investors and retirement planning advisors are looking for strategies to help save for retirement even in a 2023 recession. Their strategies must be able to withstand the recession and to ensure those looking to retire within the next few years do not have to worry about losing everything in a recession. However, they must also be proactive for those who have ten or more years prior to retirement.
Read on to learn more about planning for retirement in a recession.
Time to Review How You Are Investing Your Money in Your 401(k) Plan
Every year you should be reviewing your Investor Policy Statement. However, even if you have been ignoring it to date, this year, in preparation for a recession, take the time to review your statement.
Contact your investment advisor for a deep review of your policy statement. Ask questions regarding your policy, investment strategies, and what the policy numbers actually mean. Determine if your investment strategy will continue to work for the upcoming year or if changes are needed. If you don’t have an IPS, you should seriously think about getting one drafted. Then you must follow the guidelines put forth by the IPS.
Be Conservative
In a recession, it is best to take a more conservative approach. Now is not the time to take a stab at the stock market. When the economy is doing well the stock market can be difficult. However, in a recession, the stock market can be volatile. As a result, if your investment is not perfectly timed, you could stand to lose everything.
It may be better to keep your money in low-fee, diversified equity index funds or try a dollar-cost averaging strategy using mutual funds and exchange-traded funds. Such investments are simple and help ensure you are taking a low risk while still earning money on your investment.
Keep in mind, however, if you are already invested in stocks, you may not have to jump the gun and pull out immediately. If you plan to retire in the next five years, you may need to add to your strategy to offset a loss that may come from the stock market. However, if you have time, you may be able to ride out the storm until the market bounces back.
Consider Savings
In some cases, you do not have time to wait for the market to bounce back. However, that does not mean you need to panic. A recession is a great time to consider other opportunities to your savings approach. Ask your advisor about high interest savings opportunities that allow you to earn money on your money without the high risk associated with the stock market.
Conclusion
2023 may be an interesting year for retirement savings. However, a recession does not necessarily mean a great loss for retirement savings. Now is the time to get ahead of any looming recession. Contact your retirement investment planning professional to discuss strategies to get ahead of the recession. Call Scott Tanker at 609.922.0201 to start your retirement savings conversation.