4 Easy Steps for Retiring During a Recession
Federal economists may be dancing around the question of “are we in a recession,” but if you look at the evidence, it’s pretty easy to see that we are, at least in technical terms. We’ve endured two straight quarters of slowing growth, though job numbers remain strong, and people and companies continue to spend.
The country just pulled out of the 2020 recession sparked by the COVID-19 pandemic, so that means a lot of time spent in recessionary conditions lately. This may lead you to wonder how you should approach retirement during a recession. Should you put it off? Is it wise to retire during a bear market, which we’re also experiencing now with stocks in a prolonged decline?
Don’t worry — if you hoped to retire soon, you don’t have to change your plans. Here’s a guide to four easy steps you can take to retire amid a recession.
1. Evaluate Your Portfolio
If you’ve been avoiding your statements due to the bear market, it’s time to pull them out. You should review your portfolio and attempt to minimize your risks. At your age, you have passed the “wealth accumulation” phase, when you try to maximize your savings, and reached the “wealth preservation and distribution” phase, where you begin spending your money and avoiding risk.
2. Look at Your Financial Projections
Going hand in hand with looking over your portfolio, you should know how you plan to use the money you have. Making a budget should be your first priority. Figure out how much you need to cover daily expenses and what you might be able to cut. For instance, maybe you don’t need a car now that you don’t have to drive to work, or perhaps you can downgrade your vehicle to a less-expensive model to save money.
Use retirement software to help you figure out what your income will be based on your assets. You may determine that you’d be better off waiting a few years to retire to let your wealth grow. Or you may see that you’re in great shape and could retire tomorrow if you wanted to.
3. Think About Health Expenses
Unfortunately, growing older does make you more prone to health maladies, and medical costs tend to rise once you retire. If you are 65 and up, you become eligible for Medicare, which will offset some of your costs. But if you are below that age, you should look into private health insurance since you can no longer get coverage through work.
4. Determine Your Social Security Benefits
If you haven’t created a my Social Security account, do it today so you can see how much your estimated benefits will total. Remember, you will only receive partial benefits if you are between 62-66, with full benefits kicking in at age 66 or 67. Waiting until you pass retirement age will boost your benefits payout through age 70, too.