1. Build an Emergency Fund
A sudden illness, loss of employment, or catastrophe could make it difficult to pay your basic living expenses. Whether you are approaching retirement age, currently retired, or beginning to save for your golden years, everyone should focus on building an emergency fund. At a minimum, this fund should be enough to pay at least three to six months’ worth of your fixed expenses. This can help prevent you from taking money out of your retirement plan. After building your emergency fund, you might next turn to paying down any high interest-rate debt as much as possible. Once interest rates begin to rise, so will payments for credit cards with variable rates.
2. Do Not Rush to Sell-Off
Watching the stock market drop by 7 percent or more in volume for several days in a row is enough to cause you to panic and sell your investments. Sometimes the ups and downs of the market can have you second-guessing your long-term goals for savings. Depending on how far away your retirement is, whether to sell now or keep your money invested is a very personal decision that you’ll want to discuss with your financial advisor before you take any action.
3. Adjusting Your Portfolio’s Allocations to Lessen Risk
If you are nearing retirement age, your portfolio may not have the time to make up for the losses when stocks dip. Financial experts recommend that as you get closer to retirement, you should be lessening your risk. For example, for most folks, your portfolio should not be invested 100 percent in equities if you are 10 years out because that puts you at extreme risk of losing your savings in a very short time in a downturn.
4. Be Prepared and Be Flexible
Many things can happen during and after a recession. Jobs are lost, with some business and industries never fully recovering or being completely wiped out. This means you need to have some flexibility and alternative plans in place to free up cash flow. You may need to downsize, consider retiring earlier than planned, or changing what your plans are going to be. You may need to consider working part-time or living in an area where the cost of living is less.
5. Hiring a Financial Advisor
During uncertain economic times, having a financial advisor can be an effective way to help you protect your retirement nest egg. An advisor can help you strategize and optimize your portfolio to weather tough economic times instead of guessing when the next recession will hit.
Contact the experts at BD Financial Concepts for a free consultation to learn how you can get your retirement savings back under control.