Retirees: 4 Ways to Protect Your Savings During a Recession

Oct 5, 2022 2 min read

Retirement during a recession can mean a devastating hit to your wallet and to your peace of mind. You can’t predict when a recession will strike, how hard it will hit or how long it will last.  So how can you protect your retirement savings? 

  1. Diversify Your Portfolio

    What to Do: Diversify your assets by spreading your investments over a range of stocks, bonds, cash and other assets.

    Why it Helps: While there are no guarantees for recession-proof investing, historically, investments in different assets don’t move in the same direction. It’s common for bonds to be weaker when stocks are stronger. So, if one part of your investment mix isn’t performing well, diversifying means you’re more likely to have another part making up for it, keeping your overall portfolio healthy. It’s also a good idea to diversify within an asset class for the same reason. So, your investments in stocks might include companies in a range of sizes, sectors and geographic areas.

  2. Lower Your Investment Risk

    What to Do: Make sure your portfolio risk is aligned with your investment goals. If you prefer lower risk, your portfolio should be weighted toward investments that are less likely to lose money or that are more likely to lose smaller amounts of money if they do suffer losses. 

    Why it Helps: When you’re retired, you’re less likely to be able to withstand losses or poor performance. While you may still have some riskier investments that you don’t need to tap into yet, you do need to utilize  retirement investments to cover your living expenses. That means you can’t afford to wait for investments to recover from a downturn. 

    A low-risk retirement portfolio will have more assets in bonds and cash and fewer assets in stocks. That’s because stocks are riskier — the companies you invest in could perform poorly or even go out of business. Your age, portfolio balance and other factors play into what low risk means for you. In terms of how to recession-proof your retirement savings, you may want to have: 

    1. 20% to 60% of your portfolio in stocks
    2. 35% to 50% of your portfolio in bonds
    3. 5% to 30% of your portfolio in cash
  3. Prepare for Medical Expenses

    What to Do: Consider supplemental insurance to offset medical costs.

    Why it Helps: If you’re like many retirees, health care is one of your biggest expenses. While you can’t avoid every possible health problem, you can reduce or eliminate your medical costs by taking good care of yourself. The Centers for Disease Control and Prevention reports that 90% of health care costs go toward chronic conditions, many of which are preventable. To stay healthy, they recommend quitting smoking, choosing a healthy diet, staying active and limiting the amount of alcohol you drink. Also consider supplemental medical insurance to protect your retirement savings against medical expenses. The right insurance can offset Medicare deductibles, protect your savings against lengthy hospital stays and help cover vision, hearing and dental care — common expenses that typically rise during retirement years.

  4. Continue to Earn Income

    What to Do: Achieve a new kind of work-life balance during retirement by staying engaged in the workforce. 

    Why it Helps: Going back to work part-time can help pay for living expenses without dipping into retirement savings. Working after retirement is becoming more and more common, with many retirees choosing to remain in the workforce in a part-time capacity to stay active and connected to their communities. Be sure to balance your supplemental retirement income with potential tax penalties. Social security benefits and income from other sources such as pensions and annuities, for instance, can be partially taxed if your total income reaches certain levels. If you can wait to draw Social Security until age 70 and postpone distributions of pension accounts, that can make a big difference in how long your retirement savings last.

    Find a Farm Bureau Agent Near You

    Farm Bureau agent can help ensure you’ve considered all the ways you can stretch your retirement assets through a recession. Reach out today to connect with an expert.


Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.