Friday, July 19, 2024

Tips for Navigating a Recession from Intercoastal Wealth Planning

There’s been a lot of talk recently about a recession. Given the uptick in chatter, I thought I would write about a game plan of sorts for recession-proofing assets based on age.

Feel free to share this with others in your network who may benefit. In addition, I know recession talk can be unsettling, so please reach out if you have questions or would like to discuss specifics related to your family, your needs, and your future.

Recession-Proofing Your Retirement Savings Based on Age

In your 20s and 30s

Good news! Time is on your side. And the advice if you’re in your 20s and 30s largely stays the same, recession or no recession: 

  • Build an emergency fund of three to six months of living expenses.
  • Strengthen your resume by broadening your skillset and marketability.
  • Stay the course of investing in stocks since you have the benefit of time.

Also be sure to live within your means and pay off high-interest debt as soon as possible— and be determined not to take on more debt when the latest and greatest fads, phones, and gadgets cross your path. 

In your 40s and 50s

You should be entering your prime earning years around now. That said, it’s time to play defense. First up? Comprehensive insurance coverage. Revisit your coverage to ensure you are adequately protected. Gaps in coverage could be devastating for your financial future and personal well-being.

Also, remember that at 50, you can make additional contributions to your retirement accounts. With the anticipated catch-up contribution limit increasing from $6,500 to $7,500 in 2023, you can contribute up to $30,000 to a 401(k) plan or workplace retirement plan. You can also put away up to $7,500 in an IRA ($6,500 plus an extra $1,000 catch-up contribution).

In your 60s and beyond

The time has come to try on your retirement game plan and make adjustments as needed. The upside, if the numbers work when markets are down, is that you should be in great shape when they improve. If the numbers aren’t adding up, you may consider picking up a part-time job, maybe in an industry or field you’ve always dreamed of giving a try.

Continue to invest conservatively by increasing bonds and cash for security. It’s also good to diversify your accounts. Ideally, you’ll have a mix of tax-deferred, tax-free (traditional and Roth IRAs and 401(k) plans or workplace accounts), and taxable accounts.

Lastly, consider delaying Social Security benefits. Every year you wait, you’ll receive an 8% raise in benefits plus the annual cost-of-living adjustment. This bump comes in handy should the recession stick around for longer than anticipated.

Additionally, do keep in mind that if you made less money early in your career and are making good money now, you can increase your eventual Social Security allotment by continuing to work for a few more years after you reach 35 years of employment. As a reminder, your Social Security allotment is based on the 35 years in which you earned the most (adjusted for inflation). So, after 35 years of work, each year you continue to work at a high salary nullifies a year spent at a lower salary. 

I hope this information proves helpful. Know that no matter what the future holds, we’ll be here to help every step of the way. Please feel free to download our “Retire Happy E-book.” Take care and reach out anytime. That’s why we’re here.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker dealer, member FINRA/SIPC. Advisory, Insurance, and Tax Services offered through Bay Financial Planning and Tax Services, DBA Intercoastal Wealth Planning LLC, a Registered Investment Adviser. Cambridge and Bay Financial Planning and Tax Services, LLC are not affiliated

This post is sponsored by Intercoastal Wealth Planning

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