If you’re a soon-to-be retiree, chances are you’ve seen the headlines predicting another recession that’s likely to hit before the end of 2020.1 But understanding that it might happen and knowing what to do if it does are two very different things. If you don’t have a plan, you’re not alone—68% of people have no recession investment strategy, according to a survey by GOBankingRates.2 Thankfully, getting out ahead of a recession is just like formulating a plan for any other financial eventuality—once you’re prepared, you can be more optimistic about the future.

While it’s true that recessions strike fear in our hearts because of the money we stand to lose, it’s the loss of control that keeps many of us up at night. With the threat of a recession looming, it’s a good time to remember that there are only two retirement variables that are ever within our complete control: how long we work, and how much we save. Our returns are never guaranteed, and acknowledging that recessions are a part of the market cycle can make them easier to bear. With that in mind, it’s always a good time to prepare for a recession no matter where you are in your working life. Here’s how to ensure your portfolio can weather any storm—whether it hits in 2020 or beyond. 

"Thankfully, getting out ahead of a recession is just like formulating a plan for any other financial eventuality—once you’re prepared, you can be more optimistic about the future."

Keep your spending down, and always live within your means.

The more you save on a consistent basis, the better prepared you’ll be to handle any economic hurdles—from personal ones like slow wage growth, to national ones like inflation. But, particularly if you haven’t been doing it in the past, living within your means can take preparation and practice. If you’ve been spending as much as or almost as much as you are bringing in, take the time to figure out where your money is going and where you can trim in ways small and large. It may not be pleasant but understanding that spending is something that’s always in your control is particularly key as you head into a phase of life where your income will be lower than it is now.

Look at ways to cut down your budget if you have to.

Once you’ve trimmed the low-hanging fruit from your budget, look at other—bigger—ways you could reduce your spending if need be. You don’t have to make the cuts now, but you should have them in your back pocket for a rainy day. Which non-essential services could you drop? Which entertainment expenses could get tossed in favor of conserving money? Could you downsize sooner rather than later? Jot down a few ideas, make sure your spouse or partner is on board with them, and be ready to pull the trigger if the need to conserve cash arises. 

Make a plan to build up your cash reserves.

In our working lives, we’re advised to have an emergency fund with six months’ worth of expenses that can float us through a job loss or other financial emergency. But in retirement, you need considerably more money in cash where it can’t be sabotaged by a falling stock market—at least two to three years’ worth of living expenses. While that may sound like a lot of money, remember that no matter what the markets are doing, your responsibility to pay for essentials like food, housing and healthcare isn’t going anywhere. Keep in mind, some of that money can be in cash or other safe havens while still in your retirement accounts. The point is to prevent yourself from having to sell stocks while they’re down, depleting your savings at a quicker rate and increasing the risk that you’ll outlive your money.


Diversify your investments, and remember to be patient.

When a downturn comes, try not to lose heart over losses you see on paper. The market always rebounds, but if you sell, you’ll miss out on the recovery. Wise investors know to play the long game, and that the market is cyclical. With that said, it’s good to keep a sizeable stash of money on hand as cash, or in low-risk investments once you near retirement age. More than half of Boomers are too heavily invested in stocks,3 so meet with your financial advisor if you have any questions about your having the right mix to weather the storm.

Consider an annuity.

If the idea of balancing your cash reserves with an appropriate amount of risk in your portfolio is too daunting for the day-to-day, you may want to consider using an annuity* to cover what you expect will be your fixed costs. Annuities, often referred to as “protected lifetime income” products, are an insurance product and they pay out a set monthly amount no matter how the markets are performing. They can also provide peace of mind —consumers who own an annuity are more confident about being able to help maintain their current lifestyle up to life expectancy and beyond, according to the 2018 Guaranteed Lifetime Income Study, conducted by Greenwald & Associates and CANNEX.4 The same study showed that three-quarters of people who own an annuity said the product was highly important to their financial security.5  Read more about how protected lifetime income can work in one of my previous pieces, Women and Retirement: How Annuities Can Work Into Your Strategy

Work longer.

Finally, if you’re planning to step out of the workforce within the next few years, do the math and see what what gains could be made if you worked a year or two longer than planned. Working through a recession will likely be easier on your portfolio than retiring just as one hits. Additionally, every year you work and earn is a year that you won’t have to fund in retirement.

Check out 10 Years Since the Financial Crisis, These Lessons are True Now and Forever to learn more important takeaways from the latest recession.

Kathryn Tuggle contributed this story.


1 USA Today, “The Economy is Humming. So Why Do Experts Forsee a Recession in 2020?” June 11, 2018.

2 GOBankingRates,” Another Recession Would Ruin Two-Thirds of Americans, Survey Finds,” June 26, 2017.

3 Motley Fool,” Three Money Mistakes Baby Boomers are Making,” August 18, 2018.

4 Greenwald & Associates and CANNEX, “2018 Guaranteed Lifetime Income Study.”

5 Greenwald & Associates and CANNEX, “2018 Guaranteed Lifetime Income Study.”


*What is an annuity?

Annuities are long-term, tax-deferred investments designed for retirement. Variable annuities involve risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59 ½. Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.

Annuities are not for everyone. And, it’s important to remember that these products are meant to be long-term investments designed for retirement, so there are restrictions in place to discourage you from withdrawing all of your money at once or taking withdrawals before age 591/2. However, most annuities do allow for exceptions based on specific circumstances such as a terminal illness or other emergencies.

Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity and its underlying investment options. The current contract prospectus and underlying fund prospectuses, which are contained in the same document, provide this and other important information. Please contact your representative or the Company to obtain the prospectuses. Please read the prospectuses carefully before investing or sending money.

The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.

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