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Nearing Retirement Age? 5 Tips to Navigate a Market Recession

By Maurie Backman - May 11, 2020 at 7:49AM

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Many older workers are on edge right now, and understandably so. Here's what to do if you're one of them.

Living through a recession is scary at any age, but it can be even more alarming when retirement is near. At that point, you don't have years and year to ride out a stock market downturn, and if you lose your job, finding a new can be difficult in the face of age discrimination. If you're getting close to retirement and are worried about the impact COVID-19 might have on your senior years, here are a few tips that may help you cope.

1. Don't panic

A lot of people are worried that it could take a long time for our economy to recover from its current mess, and for the stock market to recoup its massive losses from earlier in the year. The truth, however, is that while it could take time, it may not take a ton of time. The recent economy and stock market crash were fueled by one very specific cause, and once the right scientific breakthrough is made, we may find that recovery happens somewhat rapidly. As such, try not to obsess over the unknowns, and instead, focus on action items you can take to avoid a blow to your retirement plans.

Older man types on laptop while older woman next to him holding document looks on


2. Assess your retirement savings and plan for changes once the market's recovered

If you're close to retirement age, you should have a large chunk (though not all) of your 401(k) or IRA in safe investments, like bonds. You should also have a portion of that account in cash -- specifically, enough to cover at least a year's worth of expenses during retirement. If your retirement plan assets aren't allocated in a manner you're comfortable with, pledge to shift things around once the market recoups more of its losses and you're able to move investments without taking a massive hit.

3. Boost your emergency fund

Having money in the bank could save you from racking up debt if your income takes a hit during the pandemic. And that's a very important thing, because carrying debt into a retirement is a good way to wreck your senior years. Workers are often told to have enough cash in a savings account to cover three to six months' worth of living expenses, but given today's circumstances, you're better off aiming for six to 12 months' worth of bills in your emergency fund. That way, if you do lose your job, you have more leeway for covering your expenses while you look for work, thereby preventing a situation where you feel forced to retire early.

4. Apply for a home equity line of credit

If you're nearing retirement age, there's a good change most or all of your mortgage is paid off. As such, it pays to use the equity you've built in your home to buy yourself a degree of financial security. If you apply for a home equity line of credit, you'll have money to access should the need arise, and you'll also have protection in case the stock market takes longer to recover than expected and you're forced to retire before it manages to recoup its losses. Specifically, you'll have the option to draw down against your line of credit to cover expenses and leave your retirement savings alone so your 401(k) or IRA can recover before you lock in losses by taking withdrawals.

5. Keep your retirement plans flexible

Maybe your goal is to retire in a year from now, or in 18 months. There's nothing wrong with landing on a target retirement age, but given the state of the economy today, it pays to be as flexible as you can be. You may need to get on board with the idea of postponing retirement, or working part-time during the early stages of it in light of the broader financial crisis the country is facing. Be open to changing your plans and try your best to embrace the idea rather than bemoan it.

Navigating a market recession when you're on the cusp of retirement is no easy feat. But remember, recessions don't last forever, and a few strategic moves on your part could spare you a world of stress as the country grapples with a crisis unlike any most of us have ever experienced.

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