What a Recession Could Mean for your Retirement


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The economy has been booming for the past several years. We’ve enjoyed a period of financial ease as a country. However, the more the economy expands, the more people anxiously wait for its decline. Economist after economist speculate about when the next recession will hit and how hard the markets will fall. Reactions range from mild interest to alarm.

To sum it up: Will there be a recession and how could it affect my finances, welfare, or livelihood?

Will there be a recession?

The short answer: Yes. A recession is inevitable. The “Boom and Bust” cycle of the economy mandates that for every economic period of prosperity, there will be a time of recession. We won’t delve deeply into this concept here, but simply put, a recession is the result of the economy regulating itself naturally. Financial experts and government officials can predict and affect the growth of the economy to a limited extent, but largely it’s out of their hands and unpredictable as to when it expands or contracts. Don’t be discouraged- because for every period spent anticipating a recession, an expanding economy is expected to follow.

Will there be a recession soon?

It’s impossible to predict exactly when a recession will happen, but there are indicators experts use to make educated guesses. Find a few reliable sources without political affiliations (the Wall Street Journal and Bloomberg are good places to start) to check if you’d like to stay updated.

Recently, there have been more trends indicating the increased likelihood of recession in the near future. While this prediction is based on the findings of complex algorithms, research, and analysis tools, keep in mind that some of these trends likely exist because we’ve been in an economic boom for the past 10 years now. According to CNBC, this decade marks “the longest US economy expansion in history”. For this reason, some people expect the economy to bottom out at any moment.

Since the economy has been so good for the past few years, does that mean the recession will be equally as bad?

Not necessarily. The booms and busts of the market are impacted by current events. For example, recessions in the past were worsened by misunderstanding the value of online companies (aka the dot-com bubble) in 2001 and the mortgage crisis in 2007. The economy doesn’t randomly spiral out of control without outside influences.

Granted, a recession can feel worse in comparison if the previous boom was especially prosperous.

Will the recession affect Social Security or Medicare?

This is a question we’ve been getting a lot recently. Folks are terrified that a large recession could wipe out their Medicare, Social Security, investments, savings, etc. If you take nothing else away, know this: no matter what happens, there will be a way for you to retire comfortably and affordably.

We can say this confidently because programs like Medicare and Social Security have an extremely small likelihood of ending regardless of any economic “boom or bust”. This is because regardless of political platform or party, people want these programs because they benefit everyone. On top of that, most politicians won’t vote against these programs because there’s a high likelihood they’d turn their own voters against them by canceling their benefits. Sites without political affiliation, such as Medicare’s or Social Security’s site, are great for staying updated on changes in retirement policies.

Another reason these programs are here to stay is because retired adults are the largest contributors to our economy. In retirement, people have more leisure time and tend to shop more than other ages percentage wise. If our country’s retired citizens were all impoverished, we would actually lose a significant contribution to our economy.

Should I take my Social Security early if the market crashes?

By no means! This is a common concern but we’d like to emphasize that fear shouldn’t dictate when you take your Social Security benefits. American households lose an average of $111,000/family by taking Social Security at the wrong time. Social Security isn’t going anywhere and, to that extent, the economy doesn’t affect the time you should ideally take your Social Security. For example, during the 2007 recession, claiming Social Security benefits increased “only moderately” according to a report published by the Urban Institute. During the recession most people still delayed taking their Social Security, continuing with the “decade-long trend”, to maximize their benefits.

That being said, if you need the money, go ahead and take your Social Security; that’s what it’s there for. However, if you have the ability to plan and take your benefits strategically, do it.

 Should I continue to invest in the stock market?

Some people are tempted to pull all of their investments from stocks because of the seemingly increasing risk. We still generally recommend that clients invest at least a little in the stock market. Of course, we also recommend they diversify their investments to safer saving vehicles such as annuities or saving accounts, for the best risk vs. reward return.

However, there are those that feel like they can’t rest as long as any percentage of their money remains in stocks. There’s an old saying that goes “If peace of mind is the price, it’s too high”. In other words, sometimes people still feel the risk isn’t worth it even if the investment makes sense on paper. Find experts you trust to assess your risk and determine if and how much stock investments would be a good fit for you and your retirement plans.

Are their risk-free investments I can look into?

At Cardinal, we recommend annuities to many of our clients as a risk-free alternative. Annuities have earned a “bad rap” with the general public causing many to be wary initially. However, annuities from highly rated insurers bought from trustworthy advisors can actually be an excellent way to ensure a steady, monthly income for the duration of your retirement.

In simple terms, annuities are policies you can pay into and will remain stable no matter what happens in the market. Once you retire, your annuity will give you a check each month until you die. This is what makes annuities attractive; the guarantee that you won’t outlive your money. Clients often find annuities are just what they’ve been looking for, particularly if low-risk investments are important to them.

What changes to my retirement should I expect when the recession hits?

So far, we’ve talked about what won’t change, now let’s talk about what will. With a more unstable market, financial advisors will likely recommend less risky investments and urge clients towards plans with reliable returns. Insurance rates might go up a bit with the added risk and it could be harder to qualify for certain providers. There will be an insurance provider that’ll fit your need, it might just cost a bit more than it would have otherwise.

Worst case scenario is tightening your budget through the recession years, but with the right advisor, this can be done successfully and comfortably.


A recession will come sooner or later and the way you plan for retirement might alter slightly to accommodate this change. Programs like Social Security and Medicare will likely not end no matter what’s happening in the economy, and stock investments in moderation will almost always be a good way to supplement your savings.

The recession is nothing to fear. If you have any concerns, talk to a fiduciary financial advisor or a CFP® to stay informed and make the best decision for you.

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