Are you ready for the Big “R” (Recession) ? Yes, it’s coming. I’ll tell you exactly when and what you should do.
Recently the loud voices are screaming that a recession is coming. This is what we have been hearing incessantly. I am here to tell you with 100% certainty that YES!, someday a recession will come. Eventually we will even have another another 2007-2008 style event. When ?????? ……. I have no earthly idea, and neither does anyone else! We only know when those events occur after they have occurred. But eventually I will guaranty one.
A recession refers to a significant decline in two consecutive quarters in GDP. That’s it! By definition one cannot say you are in a recession until after the recession has passed. Even so, in modern times, recessions are often short-lived and once most people notice they are in a recession, the recession is over.
To choose to make investment decisions based on recession news is a fools game and you will ALWAYS lose. Quite often in my industry financial planners pretend to see patterns. These patterns are most often not reliable, nor relevant. You must also understand that in every economy there are winners and losers. I knew people who lost everything during the boom of the 1990’s, as well as, companies that closed. I also knew people and businesses that the downturn of 2007-2008 was great for them. We don’t live in a vacuum where everything is the same for everyone.
However, going forward, when it comes to your preparation for retirement here’s a predictable formula on how you should prepare:
- More than 15 years out. Keep putting as much money possible away into your retirement accounts. Recessions don’t matter! Keep making those contributions and believe me you will be more than rewarded with great returns over time. In addition, keep debt low, have a sizable emergency cash, and turn off the news.
- If you are within single digit years to retirement. You still want to continue contributing as much as possible into your retirement accounts. You want to start taking a more proactive role in how all your assets and income go together and start protecting it. Remember, you are single digits away from retirement, so we want to make sure we protect that nest egg.
- If you are retired. You should never have an income plan that is dependent on market performance. Withdraw risk is real! Although markets do well over time, there are also times when markets don’t perform. These periods are destructive. You must establish an income plan with reliable, growing income for a long long time. Don’t worry about the possible growth you missed. If you do it right, you will be rewarded.
Don’t try to predict when the next recession will begin. That’s a losers game for individual investors.