A recession survival guide for retirees

One other thing: Because the Great Depression was so terrible, economists have basically stopped using the word “depression.” “We have come up with more targeted terms for the bigger events

in history, and so I think the word ‘depression’ has been largely reserved, at least until now, for the Great Depression,” says Mike Englund, chief economist at Action Economics, a

consulting firm in Boulder, Colorado.  “With the housing collapse earlier this century, we coined the ‘Great Recession,’ ” Englund says. “If we have another big adverse economic event, I

think the incentive is high for the media to come up with a new clever name again.” WILL WE HAVE ANOTHER RECESSION? Absolutely. Someday. But the U.S. economy is not currently in a recession.

In response to worrisome inflation levels, the Fed typically raises short-term interest rates to slow the economy and — at least officially — tries to keep the U.S. out of recession.

Sometimes, however, a recession is the only way to tame inflation, as the nation learned in the 1981–1982 recession, when the Fed, under chairman Paul Volcker, raised short-term interest

rates to 15 percent.  The Fed issued a series of rate hikes in 2022 and 2023 to rein in soaring prices. The tactic was successful in taming inflation, but now the economy's outlook is

hazy amid tariffs and growing fears of a trade war. One thing is certain: Sooner or later, the economy will sink into recession, and if you’re retired — or planning to retire soon — you

should be prepared for it. HOW RETIREES AND RETIREMENT SAVERS CAN PREPARE FOR A RECESSION 1. SAVE. “Avoid risk if you think a recession is around the corner,” says John Lonski, president of

Thru the Cycle, an investment advisory firm. The biggest risk for pre-retirees: losing your job. If you’re working, be sure you have an emergency fund you can tap if the paychecks stop.

Financial planners often recommend that you have three to six months’ worth of expenses in your emergency fund. 2. PAY DOWN DEBT. The money you save in interest can be used to build your

emergency fund. And, all things being equal, paying off a credit card that charges 16 percent interest is the same as earning 16 percent on your money. 3. KEEP A CASH STASH. Retirees who are

taking withdrawals from their savings should keep about a year’s worth of expenses in cash in their retirement account. (If you’re not taking withdrawals, it’s generally best to wait it

out.) Bear markets in stocks typically last about a year. You don’t want to sell stocks when the market is falling unless there’s no other option. If your stocks are down 10 percent and you

withdraw 5 percent, your stock portfolio is down 15 percent. 4. STAY SAFE. Most cash options pay little to nothing in interest. Money market mutual funds, a typical cash option in brokerage

accounts, currently pay 1.38 percent in interest, the Federal Deposit Insurance Corporation reports. That’s not much, but it’s better than a 20 to 30 percent loss from stocks in a bear

market. If you take cash withdrawals from your retirement account during a bear market, you’ll give your other, riskier investments time to recover.  5. SIT TIGHT. Sooner or later, you’ll

be tempted to buy stocks while they appear to be cheap. Take your time going back in. Keep in mind that by the time the NBER has officially declared a recession has started, it’s probably

near the end. After all, economic data usually lags, particularly GDP. The average recession lasts about 10 months, and the NBER typically needs about nine months to collect all the data it

needs to declare that a recession has started.