As the average age of a person living in the United States rises, so does the population of seniors. opens in a new windowAccording to the U.S. Census Bureau, in just 30 years, the number of Americans over 65 will double from 2010 to 2030. As our country’s population ages, many seniors are concerned about their financial future and how they will overcome retirement challenges and pitfalls. Having been through multiple recessions, I already know that being too young or old isn’t an excuse to let fear hinder your recovery or decision-making process when tough times arrive on your doorstep. But don’t fear – here are seven reasons why seniors shouldn’t fear recession.
If you want to be financially stable in the event of a recession this year, it’s important to start saving immediately. It may be possible to amass a sizeable emergency fund by making temporary, severe cuts to spending and by picking up a side gig.
Key Takeaways
- A recession is a period of widespread economic contraction that lasts for an extended period of time.
- A well-diversified portfolio will help you ride out any storm.
- Having six to nine months of savings is sufficient to find a new job, even in a recession, according to opens in a new windowTerry Turner, senior writer and financial wellness expert for Annuity.

What is a recession?
Those who are now retired are likely to have experienced a number of recessions and know how unpleasant they can be. Two consecutive quarters of negative economic growth is the common definition of a recession. Put another way, real GDP (GDP adjusted for inflation) needs to decline for a minimum of six months. Unfortunately, that doesn’t give a very good picture.
The National Bureau of Economic Research (NBER) is an independent, non-governmental organization devoted to the study of economics. The institute has a Business Cycle Dating Committee that employs a number of methods for pinpointing the beginning and end of economic downturns. One such metric is a gross domestic product. In addition to employment figures, industrial output, and retail sales are all considered by the committee.
To paraphrase the opens in a new windowNational Bureau of Economic Research, a recession is “a significant decline in economic activity that is spread out across the economy and that lasts more than a few months.” A recession is characterized by a rise in the unemployment rate, the closing of businesses, and general economic distress.
Since 1854, the United States has experienced a total of 35 recessions, each lasting an average of 17 months (source: NBER). Since 1945, the average length of a recession has decreased to 10.3 months. The economic downturn that began in 1873 and lasted for 65 months was the worst in history. Here are the average durations of the last 10 recessions:

How can I prepare financially for a recession?
The general consensus among financial experts is that you should have at least six and preferably nine months of living expenses saved up in case of an unexpected financial setback. Keep this sum available for quick withdrawal by putting it in a high-yield savings or money market account. See what other accounts are offering in terms of interest rates; a high one will help you get the most out of your savings.
Having six to nine months of savings is sufficient to find a new job, even in a recession, according to opens in a new windowTerry Turner, senior writer and financial wellness expert for Annuity. He recommends keeping an emergency fund so that you can avoid maxing out credit cards and damaging your score for everyday expenses.
Save as much as you can without jeopardizing your retirement plans if you don’t already have an emergency fund. Maintaining financial stability in the event of job loss is only one of many unexpected benefits provided by an emergency fund.
7 Reasons seniors shouldn’t be scared of recessions
The average recession lasts about opens in a new window17 months, but the labor market can take much longer to recover. The most distressed neighborhoods opens in a new windowexperience persistent declines in employment and population. We’ve been hearing a lot of bad news about the state of the global economy. In fact, you might have trouble finding someone who doesn’t believe we’re in a period of either rising or high unemployment. But there are actually several reasons why seniors need not fear recessions.
1. Invest for the long haul
Although a drop in the market can be frightening, if you don’t sell during a recession and hold onto your investments through thick or thin, you won’t lose any money over time. In fact, buying stocks when prices are low generally leads to great returns for investors—you might even thank yourself later!
While it’s true that you shouldn’t draw down your investments too much near retirement, it’s important not to leave yourself without enough money in liquid, low-risk investments so as to give the stock portion of your portfolio time—and hopefully recover. Remember: You don’t need all of your retirement money at age 66; just a portion will do!
Although it might be a bear market when you’re 66, there could well be a bull market by the time you turn 70.
2. Most retirement investors are long-term investors
In the last few years, the stock market has had its ups and downs. It’s been a tough year for retirees and those planning for retirement to sit on the sidelines and watch their portfolios lose money. But senior investors shouldn’t let this bad performance discourage them or make them make rash decisions involving their long-term financial future.
3. Time in the market not perfect timing is the secret to long-term success
Lots of people might cut back on their stock market investments or even sell all of their shares until things improve. To try to predict when the market will rise or fall is the very definition of market timing. Knowing when to get out and when to get back in is an impossibility.
According to Mark Hamrick, senior economic analyst for opens in a new windowBankrate.com, “most people, most mere mortals, are not able to time the market.” I think even Warren Buffett will indeed agree with that.
Saglimbene points out that for every bear market, stock returns tend to bounce back after hitting the bottom.
Saglimbene recommended not making big allocation changes while you are “in the grips of either a recession or bear market.”
A well-diversified portfolio will help you ride out any storm. Trying to predict when the market will bottom out would be disastrous for investors right now because no one can know where prices are going next—they might keep falling or they may rise again soon.
4. Bear markets don’t last forever
Even if you have no idea what a bear market is, your fear of it will be well-developed.
This week, the S&P 500 index dropped 20% from its recent high, meeting the criteria for a bear market.
According to opens in a new windowAmeriprise Financial’s global markets strategist Anthony Saglimbene, the average duration of a bear market since 1950 is around 418 days.
If you are an investor with a longer time horizon, Saglimbene advises you to “just shift your view a little bit and look at this as an opportunity.”
He recommended putting your money into companies with solid financials, a steady stream of cash flow, and products that consumers want and need.
You can benefit from “dollar-cost averaging” by investing the same amount of money on a regular basis, regardless of market fluctuations.
The stock market may be taking a beating right now, but it has historically recovered well after a recession. Not having stock market exposure means missing out on the eventual rebound.
5. When you sell at the wrong time, you lose money in the stock market
Investors can lose a lot of money due to the volatility of stock prices if they aren’t aware of how their decisions affect their portfolios. Capital gains are realized when an investor sells their shares for more than they paid for them. In contrast, the investor will not profit if the stock price drastically drops due to waning investor interest and a decline in the perceived value of the stock.
6. Plan your retirement portfolio for both good and bad times
Inflation is causing the Federal Reserve to raise interest rates to an amount not yet determined. With rising rates there is a fear/danger of an economic recession. Equities and bonds are going down due to rising interest rates. Experts will tell you it is critically important to properly allocate your portfolio in a way that matches your risk tolerance. The recent historical events in the markets have shown that a portfolio that is not properly allocated can lose a large portion of its value very quickly.
When you’re financial planning your retirement, it’s vital to take stock of how much your portfolio will be worth and how much income it’ll generate in the future. The last thing you want is to feel unprepared during the next recession. Seniors need to plan to survive both good and bad market conditions. Understanding how risky your investments are can go a long way toward that goal, which is why it’s important to know what the historical volatility of your portfolio has been.
7. Ignore News, the market will rebound over time
The best way to keep your investments on track is to ignore the news. Market gurus, economists, and other experts try to predict the future all the time. Unfortunately, they’re not always right. The best strategy is to focus on the long-term rather than the short-term ups and downs of stock prices.
Lastly, Credit card debt, student debt, and any other debt with a variable interest rate is a priority that needs to be addressed immediately. This is due to the fact that as interest rates increase, the total amount of debt also increases.
Adjust your portfolio based on your age, not the market
Investing’s first rule of thumb is to lessen your exposure to risk as you get older. That makes sense, given that retirees don’t have the time or resources to wait for the market to recover from a dip. The difficulty lies in determining an appropriate level of security for your current life situation.
Using a simple rule of thumb has been useful in simplifying asset allocation for many years.
This rule of thumb states that an individual’s stock allocation should be equal to 100 minus their age in years. Therefore, a typical 60-year-old investor should allocate 40% of their portfolio to stocks. To round out the portfolio, we would have high-quality bonds, sovereign debt, and other liquid investments.
Consider alternative ways to fund your retirement
It’s a scary thought — not being able to retire and depend on the government. The social safety nets our society has built around us is a rather recent phenomenon and one that will likely go away or be completely restructured within the next few generations, at best.
If you’re like me, you’re worried about how you’ll fund your retirement someday and if it will include a trip around the world or relaxing in your mansion on the hill. But is saving for retirement as we know it even possible? Are our futures doomed? No! This post includes some alternatives to traditional ways of funding our retirements and ways to get started on them today.
Reverse Mortgage
A reverse mortgage is a type of home loan that allows homeowners 62 years or older to convert a portion of their equity into cash.
The product has been around for a while and has been used by seniors to supplement their retirement income, but it’s not without its drawbacks. The biggest one being that the loan must be repaid when the last borrower dies or leaves the house.
HELOC
One other common method of utilizing home equity for financial needs is through a home equity line of credit (HELOC). Home equity lines of credit (HELOCs) are similar to credit cards in that they use your home’s equity as collateral for an ongoing line of credit.
The account allows you to borrow money as needed, pay it back, and borrow again. Only the amount you borrow will be subject to interest, though there may be additional fees associated with withdrawals.
Health Saving Account
An HSA is a tax-advantaged savings account used for medical expenses and possibly retirement. Only those with high-deductible medical insurance can open an HSA. If you have a health savings account (HSA), you can use the money in it to pay for medical expenses that are not covered by insurance.
Tips to Recession-Proof Your Life
Have an Emergency Fund
Have 3-6 months’ worth of expenses saved in an emergency fund. You never know when a major expense will pop up and knock you off your feet. Having money set aside for just such an occasion is vital to not only making it through these times.
Live Within Your Means
Keep in mind that you can’t spend money you don’t have. Having a budget and sticking to it is one of the best ways to keep your personal finance on track. You should also be sure that your spending habits are realistic; don’t splurge when money is tight or make purchases based on impulse rather than need.
Keep Your Credit Score High
The only people who will be able to get a mortgage, credit card, or another loan when credit markets tighten are those with excellent credit. Maintaining a high credit score requires responsible financial behavior, such as timely bill payments, maintaining an open credit card account history, and keeping a low debt-to-credit ratio.
Maintaining contact with your creditors and working out a plan to keep your accounts in good standing is especially important when times are tough. Many financial institutions, financial adviser, and companies would rather have you stay as a customer than have to write off your account as bad debt.
Have Additional Income
You never want to be dwelling on the fact that you’re worried about whether or not your company will let you go. We’ve all seen those sad faces of someone with their head in their hands because they were let go from their job. You don’t want to be that person. Having additional income means that if you were ever to experience a layoff, or even if your hours were getting cut, you could supplement your income easily without having to wait until your next paycheck.
Diversify Your Investments
You never want to be solely reliant on one source of income. If you have other investments that can help supplement your money, it makes your financial situation much easier in case something goes wrong with one of them.
Invest for the Long Term
You should always be investing for the long term. It’s important to invest in things that will provide you with a steady stream of income over time, not just something that will make money quickly but will then go away. This means investing in stocks, bonds, and real estate instead of gambling on get-rich-quick schemes or trying your luck at picking lottery numbers.
Be Real About Risk Tolerance
When you’re investing, it’s important to be realistic about your risk tolerance. If you’re not willing to lose any money that you invest, then don’t risk more than you can afford to lose. It’s also important not to let your emotions get in the way of making good decisions.
Reasons Why seniors shouldn’t fear recessions FAQs
How does a recession affect seniors?
Retirees, those who are thinking of early retirement may be most concerned about a potential recession’s impact on their savings. During a recession, the stock market will frequently (but not always) experience a significant decline. This means that your retirement fund and/or portfolio may suffer losses.
What should retirees do in a recession?
After leaving full-time employment, retirees who retire during a recession may wish to consider a part-time job. A part-time job can reduce withdrawals from retirement accounts, allowing the balance to recover after a market downturn.
What is the best thing to own during a recession?
You can cushion the blow of a potential economic downturn or recession by incorporating a number of simple measures into your daily routine now. You can weather an economic storm more easily if you have an emergency fund, good credit, multiple streams of income, and a disciplined approach to spending.
What should you avoid during a recession?
In order to protect your portfolio from unnecessary risk during a recession, you should avoid investing in highly indebted companies, high-yield bonds, and speculative investments. Instead, investors should prioritize safe investments such as high-quality government bonds, investment-grade bonds, and companies with healthy balance sheets.
Who thrives during a recession?
Given the decrease in discretionary spending that occurs when the economy is in a downturn, discount stores tend to do very well. Customers who see a decline in their disposable income can either reduce their spending or switch to less expensive alternatives.
Conclusion
There’s no need to freak out about the economy going into a downturn; just be extra careful with your spending and avoid taking any chances. Despite the severity of the current economic climate, there are still plenty of things you can do to better your life and prepare for the future. Among these are creating an honest budget, saving up an emergency fund, and looking for other ways to earn money.
If you are still concerned about how a potential recession might impact your retirement plans, set up a free consultation with me. I would be happy to chat with you about your unique situation and offer strategies on how to protect your assets during turbulent economic times.