Why Retiring Into a Recession Isn’t the End of the World

Figuring out "the perfect time" to retire is only partially a financial decision. After all, if the second half of your life were just about money, then no one would ever stop working and earning.

But when your retirement timeline intersects with major economic uncertainty, it's understandable that the money side of the equation might start to feel a little more important. News headlines blaring words like DOWNTURN, INFLATION, and RECESSION can overwhelm plans you've been making for years, and the goals you've been dreaming about for decades.

It's at these uneasy moments that the true value of a comprehensive financial plan shines through. Right now, most folks who are willing to stick with their plan and work closely with a trusted advisor should be able to navigate some turbulence and stay on course for a secure retirement.

The Myth of "Perfect" Timing

So, from a purely money perspective, what does an ideal retirement scenario look like to you? I'm guessing:

• You've hit your retirement "number."

• The financial markets are up.

• Interest rates are low.

• Inflation is nudging up the annual cost of living at a reasonable rate.

• The world feels safe, stable, and predictable.

Sounds pretty good to me!

Now: How many of the items on this list can you actually control?

You could make an argument for hitting that retirement number. But, again, folks who are only focused on driving up their balances will always find a bigger number to aim for. And if that number isn't tied to actionable goals that make your life more fulfilling, then what's the point?

As for the rest of the items on this "perfect" retirement list, I doubt you could look to recent history and find any 20–30-year retirement period where all those boxes are checked.

Think about someone who retired in the traditional 60-65-year-old window around 2000. That senior has weathered 9/11, the Great Recession, and COVID, as well as countless wars, elections, and natural disasters. Had that 85ish senior decided to wait all that out and keep working, today they'd be worried about tariffs, more wars, and more political unease.

Managing the Real Risk

So, how has Keen Wealth helped so many seniors ease into a successful retirement despite all the ups and downs they face in any given year?

First, we remind folks that the real risk retirees face isn't a recession or any other economic bumpiness. It's a disruption to your sequence of returns, meaning how and when you tap into the resources you've been building up.

For example, many folks who manage their money solo don't diversify their investments or balance their overall portfolios in the service of a long-term vision.

A worst-case scenario: imagine a senior who is overinvested in one or two industries -- or worse, one or two specific securities. If that senior was planning on living off withdrawals early in retirement, then their "plan" is vulnerable to market swings, which could create a chain reaction of panic decisions:

That retiree might try to get out of the markets altogether, making short-term losses permanent.

They might take Social Security way ahead of schedule, reducing their benefit potential.

Pulling on these emergency income levers might raise their taxes.

They might turn to cash accounts that weren't designed to cover annual living expenses.

In extreme cases, they might even have to consider selling vehicles or their home.

Smart Strategies to Recession-Proof Your Retirement Income

A comprehensive financial plan that's tailored to your specific retirement goals can make these sorts of problems manageable, and even advantageous. Some key strategies we often use at Keen Wealth include:

Segmenting Cash Flows: Divide your retirement into buckets that cover a range of scenarios. You might keep a liquid bucket to cover emergencies, like home repairs or a health scare. Another bucket might be 3-5 years-worth of living expenses in fixed income investments. And another bucket might hold your long-term invested assets that are designed to be tapped years down the road.  

Tap Taxable Accounts First: By withdrawing funds from your taxable accounts before tapping into tax-advantaged accounts like a Roth IRA, you can control your tax liability and maximize the potential of your tax-deferred accounts.

Work: Taking a part-time job can help some seniors feel a little more comfortable with their retirement income and also add some structure to their retirement schedules. Options like consulting or starting your own business can also repurpose your lifetime of professional skills and knowledge.

Don't Let Fear Drive Your Decisions

Successfully navigating the retirement transition is about resilience, not perfection. From market downturns to unexpected illnesses, most seniors will have to face some unexpected challenges no matter when they stop working.

Keen Wealth’s comprehensive planning process can give you options to solve problems without sacrificing long-term goals. But, more importantly, my team can give you the confidence and support you need to keep living your best life.

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About Bill

Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

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