How Recession Predictions Might Impact Pennsylvanians Nearing Retirement
Retirement is a milestone you’ve probably been planning for most of your adult life. And once you get there, it will hopefully be a time for rest and relaxation that you can spend with your family and friends. Perhaps you’ll finally have time to turn your hobbies into full-time projects, or maybe you’re planning to start travelling the world.
However you choose to spend your time out of the workforce, there are a lot of financial considerations to keep in mind as you get closer to your retirement party—are your investments secure? Do you have enough money saved to get through a dip in the markets? Is your bank account recession-proof? Addressing these things early on can help you prepare.
The Next Recession Could Impact Your Retirement Plans
Economists are predicting that the next recession will hit in 2020—and not all states are ready to face it. According to a report from Moody’s Analytics, which evaluated the level of preparedness for states to face an economic downturn, Pennsylvania is among the 14 states deemed poorly prepared. This means the Keystone state will inevitably feel the impact of the next recession. For professionals approaching retirement, this means actively taking steps to protect yourselves from the potential repercussions of a market crash. After all, while the market can always recover, it might not do so fast enough for you to enjoy your retirement as planned.
During the Great Recession of 2008, investors reported losses of $8 trillion on the stock exchange. This was a particularly trying time for people nearing retirement, as they experienced worrying losses in their equity-based pension plans and had a difficult time navigating the sparse job market.
Explore more tips to protect your finances during an economic downturn.Learn More
Tips to Help Soften the Blow
We know that the stock market is cyclical—where there’s a high, a low is bound to follow. The economy has been on a growth trend for the last decade, and that’s causing many to believe that a recession is due. The good news is that if you want to be prepared, there are a few things that you can do.
Revisit Your Retirement Plan
If you’re proactive with your financial planning, it’s likely that you’ve had a retirement plan in place for some time. As you keep an eye on the ebbs and flows of the market, consider what changes you might need to make to help you weather a financial storm. Should you transfer some of your retirement funds to low-risk investments like high-yield savings accounts or money market accounts? Have you considered fixed index annuities? These are all ways to help protect your money as you move towards your golden years.
Consider Postponing Your Retirement
While this might not be an ideal short-term solution, delaying retirement by even a year can boost your social security payments—which are based on the 35 years in which you earned the highest salary—and give your existing savings more time to grow with compound interest.
Plus, by keeping a source of income while you wait for the recession to pass, you’ll be able to continue putting money towards your retirement fund to ensure that when you do retire, it’s seamless.
Account for Medical Costs
Medical costs are a significant portion of the expenses faced by retirees. A woman retiring this year can expect to spend on average $150,000 on medical expenses, and a man will spend $135,000. As you’re putting money away for retirement, keep these costs in mind—they’re not something you or your family want to be surprised by down the road.