As a result of COVID-19, the US economy is headed for a recession for the first time since 2009. In fact, the entire global economy is in the midst of a dramatic economic contraction. For those of you who are near the age of retirement, COVID-19 has certainly made it more challenging to prepare an adequate retirement plan. However, there are steps you can take today to recession-proof your retirement plan and help protect your savings for tomorrow. Let’s explore a few of the details.    

  1. The first important step is to make sure your assets are properly diversified. Asset allocation is always a critical component to protecting your retirement savings. However, it becomes even more important as you approach the age of retirement. Why? Because if the stock market experiences a substantial decline, you may not have enough time to recover your losses. A great way to determine the appropriate asset allocation is to visit with a licensed investment professional. The licensed professional can provide you with a specific asset allocation based on your age, retirement goals, risk tolerance and current account balance.        
  2. The second important step to recession-proof your retirement plan is to avoid the temptation of panicking and selling your investments when the stock market experiences a sharp decline. Over the long run, investing in the stock market has provided a nice rate of return. However, the stock market can be quite volatile at times. Therefore, most investors struggle with the desire to liquidate their stock portfolio when volatility increases. An excellent strategy for avoiding the temptation to sell the equity portion of your account, is to work with a licensed investment professional. Together, you and your licensed advisor can develop a long-term plan designed to weather the storm even during the most difficult times.
  3. The third step to help recession-proof your retirement plan is to make sure your portfolio is invested safely. It’s not uncommon for older investors to discover that they have highly speculative investments in their portfolios. Quite often, young investors are willing to accept a higher degree of risk in exchange for a potentially higher rate of return. However, as these investors near the age of retirement, it might be a good idea to remove these aggressive speculative investments from the portfolio. A licensed investment professional can help investors determine which speculative assets should probably be removed from the portfolio (or at least reduced).             
  4. The fourth step is to maintain a long-term perspective. Very often, investors have a tendency to focus on short-term stock market fluctuations. This is a bad habit because it usually leads to poor investment decisions. Investors who obsess over daily stock market gains and losses typically lose sight of their long-term “big picture” objectives. Additionally, historical results have proven that long-term investments generate a greater rate of return versus short-term investments. Also, as a general rule of thumb, long-term investing provides a more favorable tax treatment in comparison to short-term investing. A licensed investment professional can help you maintain a long-term investment perspective.

Angelica Roxas has been licensed as an investment professional for 20 years. She is a Financial Strategist and President of Strategic Asset Preservation, Inc. Angelica is an expert in helping pre-retirees and retirees develop a recession-proof retirement plan. 

Do you have questions about recession-proof retirement strategies? If so, you may want to meet with Angelica. She can help you prepare a specific plan of action to cover any situation that may occur in your financial future. Call or email us now for your virtual complimentary strategy session. 

Tel: 424-247-1120