One of the biggest concerns when the markets get volatile is what will happen to your retirement savings. Without proper investments, your assets could be wiped out during market volatility. This is why it’s essential to start planning now.

 

If you’re planning on retiring or are about to retire in the next couple of years, some strategies can help protect your investments from a potential recession.

 

Build a Diversified Portfolio

One of the most important steps investors can take to protect their investments from a potential recession is diversifying their assets. Doing so can help them avoid having all their investments in the same asset class.

 

Ideally, you should allocate a healthy mix of bonds and stocks to spread the risk across different asset classes. For instance, defensive stocks can perform well during market downturns. If you prefer individual stocks, consider using defensive exchange-traded funds (ETFs).

 

Aside from necessities, utilities, health care, and consumer staples are also considered defensive sectors. Consumers typically continue to purchase these items even during market downturns.

 

Although stocks are generally considered safe investments, they are still susceptible to market swings. Therefore, diversifying into government securities can provide an additional layer of protection.

 

Use an Annuity

Despite the negative reputation that annuities have had, they can still provide both returns and safety during uncertain times in your retirement. An insurance contract, known as an annuity, is a type of contract that provides payments for a set period. It can be fixed or variable and can pay you an often low-interest rate. Most of the time, annuities will pay out a death benefit to your beneficiaries.

 

Annuities come with high fees, as investors must pay the cost of life insurance and additional management fees. Certain types of Annuities can help protect against recessions, and they can be appropriate for individuals with longer investment horizons.

 

Although fixed-income Annuities can provide some protection against market downturns, they can also limit your potential gains. The best type of contract depends on how frequently you can pay into it and how much you can get paid.

 

Don’t Take Social Security

You should delay taking your Social Security benefits until age 70. This allows you to receive them at a higher rate than if you were to take them at full retirement age.

 

Even though the amount of money you will receive over a lifetime will not be the same, delaying the start of the distribution phase can allow you to receive a larger monthly check. If you live longer and delay, you’ll have a higher benefit.

 

You won’t be able to spend the money you receive from delaying your Social Security benefit, though you’ll need to use retirement accounts or other resources to cover expenses. During a recession, taking advantage of non-taxable accounts, such as a Roth IRA, can help keep your Social Security secure.

 

Keep Consistent Income

One of the most important ways to protect yourself from money loss is to keep working. There are many ways that retirees can still earn income, and these can be used to cover potential losses during a recession. Some side businesses can provide retirees with additional income.

 

If you’re not ready to retire but are still concerned about your financial situation, having a second source of income can help you maintain a positive economic outlook. Having a steady income can help protect you from market downturns and volatility.

 

Although most of us will likely experience multiple economic crises throughout our lives, you must have a diversified portfolio to protect yourself from market downturns. By diversifying your assets and prioritizing activities and income-producing investments, you can position your savings to weather the changes in the market.