The stock market is experiencing volatility, with the S&P 500 down nearly 10% from its all-time high. Many people nearing or in retirement are looking for ways to protect and enhance their retirement savings. Here are six expert-recommended tips to help cushion your retirement against a potential recession.
First, max out your contributions to tax-favored retirement accounts like 401(k)s, IRAs, and HSAs if you’re not strapped for cash. The annual 401(k) contribution limit is set to increase to $23,500 in 2025. For those 50 and over, catch-up contributions can push this limit to $31,000.
Individuals aged 60-63 can contribute up to $34,750 thanks to the SECURE 2.0 Act. Second, automate your retirement contributions to ensure consistent investing, especially during market downturns. This strategy allows you to purchase stocks at a discount and maintain a steady investment approach regardless of market conditions.
Third, consider postponing your retirement by even a year or two. This can significantly bolster your savings.
Tips for boosting retirement savings
Extended work periods allow for additional contributions to your retirement accounts and delay portfolio withdrawals, which is especially advantageous in a down market. Fourth, build up your cash savings as you near retirement. Aim to save at least a year’s worth of living expenses in easily accessible accounts like high-yield savings or money market funds.
This buffer allows you to cover expenses without needing to sell off investments at a loss during a downturn. Fifth, shift your focus from spending to saving. Reduce non-essential expenses and redirect those funds to your retirement savings.
Prioritize essential expenses and consider refinancing insurance, downsizing, or paying off high-interest debt to lower your overall expenses. Finally, consider delaying your Social Security benefits. Delaying can result in a larger monthly check, increasing for every year you wait from age 62 up to 70.
This larger benefit provides a form of longevity insurance, offering more guaranteed income if your portfolio’s growth is temporarily stalled, such as during a recession. By applying these strategies, you can help ensure your retirement savings are more resilient to market downturns and better positioned to support you through your retirement years.
Photo by; engin akyurt on Unsplash