Though market corrections and recessions are common enough to be expected once every decade or so, this can come as cold comfort to retirees who are now forced to navigate a declining market.1 Often, simply putting off your retirement to a more convenient time simply isn't an option. What can retirees do to help preserve their nest eggs during times of economic uncertainty and upheaval? Read on for some tips and tricks to help you retire during a recession.

Consider an Oversized Cash Cushion

One of the biggest dangers associated with retiring in a recession is having to cash out investments while they're hovering at market bottoms. For long-term investors, simply waiting a year or two for market values to recover can be all that's needed to potentially regain these losses, but when expenses arise that require an instant cash infusion, retirees may find themselves between a rock and a hard place.

One potential way to recession-proof your retirement portfolio is to keep a year or two's worth of expenses set aside in cash. This can allow you to continue to skim off profits when markets rise without having to cash out mid-recession, while the market is still recovering.

Help Recession-Proof Your Income

It's worth meeting with a financial professional to discuss optimizing your Social Security retirement benefits. The decision whether to take benefits at 62, 67, or 70 can depend on factors like your age, income, and expenses, along with your spouse's age, health, and projected Social Security benefit. Because Social Security benefits make up a major proportion of many retirees' incomes, structuring these benefits to receive this money when you need it most can boost your nest egg.

For some people, a fixed annuity can be another way to maintain a steady income during both good and bad times, especially for retirees who don't yet qualify for Social Security benefits. However, during periods of low-interest rates, finding a high-yield annuity can require an intensive search.

Consider Freelancing or Easing Into Retirement

Retirement doesn't necessarily mean going from 60 to 0 overnight. One way for retirees to stretch their retirement savings while easing into the major change in lifestyle associated with retirement is to work part-time in a hobby field or consult in their area of expertise for a few years after leaving their full-time position. Something as simple as working at a coffee shop or walking dogs a few mornings a week can bring in extra income during lean times while also providing some structure to your day.

As the economy recovers, you can decide whether to continue these freelance jobs, gigs, or volunteer opportunities or opt to phase them out in favor of a total retirement.

Important Disclosures: Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
1 https://www.forbes.com/sites/cameronkeng/2018/10/23/recession-is-overdue-by-4-5-years-heres-how-to-prepare/#31ec04a240d8
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