There has been a lot of chatter recently by economists and news outlets using the word “recession”. Understanding that it could happen and understanding how to handle it are different matters. If you are one of those nearing retirement or in retirement that have no strategy, you may be right to worry. Planning for a recession involves making a plan for other financial eventualities. If you prepare, you can face the future with more confidence. When the threat of a recession exists, recall there are two retirement variables within our control. How long we work and how much we save. Within this framework, there are several other things to consider about recessions and retirement.

The first point to remember is live within your means. Depending upon your lifestyle going into the recession, it might require preparation and practice. Spending as much as your income needs to stop. This may require figuring out exactly where your money goes. When you know this, easier to trim your budget. Less spending might not be fun, but spending is always in your control. This is important as you head into a recession and your income will be less.

A second element is to potentially reduce your budget. Once you have trimmed the obvious low hanging fruit, you can focus on bigger ways to reduce your spending if need be. You need not make these bigger cuts now. For instance, could you cut out your Starbucks excursions once per week? Twice per week? Could you also cut other nonessential services such as eating out or that new television or entertainment center? Could you lower transportation expenses? These will no doubt require sacrifice. Ensure that your spouse or other partner agrees and will work with you.

A third item to remember during or to prepare for a recession is to devise a plan to accumulate cash reserves. The point of building up cash reserves is to keep you from having to liquidate your stocks. I am sure we can all recall the advice of well-meaning investment planners: have an emergency stash with several months of expenses. This stash should carry us through losing our job or another financial emergency. In retirement, more cash reserves are necessary to ensure against an economic downturn. Remember that regardless of what financial markets do, you still have the responsibility of food, housing, transportation, and healthcare. You do not want to decrease your savings and outlive your money.

A fourth point to remember is patience with the market. It is tough to see losses on paper. But, remember that the loss is only on paper and that it is not gone until you withdraw it. Realize that the market comes back, so if you sell, you will not see the benefits of the recovery. Know the market is cyclical and will (eventually) recover.

A fifth factor to consider is to work longer, or get a part-time position. Crunch the numbers and determine what benefits you could receive if you worked a year or two longer. Consider that any work you do before/in retirement increases your retirement money.

We are here to help you plan for your retirement, regardless of the market or economy. Let’s focus on your savings and your goals.