With talk of a looming recession echoing through the news, many retirees are asking themselves a crucial question: Is my retirement plan ready for what’s coming? For Baby Boomers, seniors and those already in retirement, the fear of an economic downturn can feel especially pressing. After all, you’re likely relying on a combination of savings, Social Security and investments to fund the rest of your life — and the idea of a market crash or prolonged downturn can be unsettling, to say the least.

But here’s the good news: While a recession can pose challenges, it doesn’t have to derail your retirement. In fact, with the right strategies, you can protect your nest egg and weather the economic storm without making drastic changes to your lifestyle. Here’s how to recession-proof your retirement plan and navigate these uncertain times with confidence.

1. Don’t panic — but do prepare

The first and most important rule when facing a potential recession is don’t panic. Emotional decisions can lead to poor financial choices, and selling off investments at the first sign of trouble is a common mistake. Remember, markets tend to rebound over time, and pulling out of stocks in a downturn locks in losses, making it harder for your portfolio to recover.

That said, preparation is key. A recession can impact different aspects of your retirement plan — from investments to income to daily expenses. Taking a proactive approach now can help you avoid scrambling if and when a downturn hits.

What you can do:

Take a close look at your current financial situation. How much of your retirement income comes from investments, and how much is guaranteed, like Social Security or annuities? The more secure your income sources, the less likely you’ll need to worry during a recession. If you’re heavily reliant on the stock market, it may be time to rebalance your portfolio to include safer, more stable investments.

2. Reevaluate your investment strategy

For retirees, managing risk is critical. While you still want your investments to grow, you also want to protect your savings from big losses. In a recession, stock markets often take a hit, and if your portfolio is too heavily invested in stocks, you might find yourself losing more than you’re comfortable with.

It’s important to strike a balance between growth and safety. This is especially true if you’re withdrawing from your portfolio to cover living expenses — selling off investments in a downturn can deplete your savings faster than expected.

What you can do:

Now might be a good time to review your asset allocation. A typical rule of thumb is to hold a mix of stocks and bonds that reflects your risk tolerance and time horizon. For retirees, this usually means a more conservative allocation, such as 40%-50% in stocks and the rest in bonds or fixed-income assets.

Consider diversifying into safer investments like fixed index annuities. These financial products allow for growth tied to the stock market but protect your principal from losses during market downturns. They can also provide a guaranteed income stream — offering peace of mind even in a recession.

3. Build a cash reserve

One of the best defenses against a recession is having a healthy cash reserve. Having cash on hand allows you to ride out market volatility without being forced to sell investments when they’re down. It’s essentially a buffer that protects your long-term investments from short-term financial needs.

A common mistake some retirees make is not having enough liquid savings. If all your money is tied up in investments, you may find yourself scrambling to cover unexpected expenses or withdrawals in a down market.

What you can do:

Aim to have at least six to 12 months’ worth of living expenses set aside in a cash account or other easily accessible, low-risk savings. This could include money in a savings account, money market fund or short-term certificates of deposit (CDs). That way, if the market drops, you can draw from this cash reserve rather than selling off investments at a loss.

4. Delay major withdrawals

During a recession, one of the biggest risks to your retirement plan is withdrawing too much from your investment accounts. When the market is down, selling investments locks in losses, making it harder for your portfolio to recover when the market eventually rebounds.

If you’re withdrawing more than necessary during a downturn, you’re essentially eating into the principal faster than it can grow back, which could shorten the lifespan of your retirement savings.

What you can do:

If possible, delay taking major withdrawals from your retirement accounts during a recession. This could mean cutting back on discretionary spending, such as travel or large purchases, until the market stabilizes. By reducing your withdrawals, you give your investments more time to recover and maintain their long-term growth potential.

Another strategy is to rely more on guaranteed income sources, like Social Security or annuities, during a recession. These income streams aren’t affected by market fluctuations, so they provide stability when your investments may be struggling.

5. Keep an eye on inflation

Recessions and inflation often go hand in hand, and rising prices can make it harder to stretch your retirement income. Health care, housing and daily essentials can all see price increases during economic downturns, which can quickly strain a fixed budget.

For retirees, the combination of market volatility and inflation is a double threat — your investments may lose value while the cost of living goes up.

What you can do:

To help combat inflation, make sure your retirement income plan includes assets that have the potential to outpace rising prices. While it’s tempting to shift entirely to conservative investments, some exposure to growth assets, like stocks, is important to help maintain purchasing power over time.

Treasury inflation-protected securities (TIPS) are another option to consider. These bonds are designed to increase in value with inflation, providing a hedge against rising costs.

6. Stay flexible and adapt

Perhaps the most important lesson in preparing for a recession is to stay flexible. The economy is unpredictable, and even the best-laid plans may need adjustments over time. The key is to remain adaptable and willing to make changes as needed.

What you can do:

Revisit your retirement plan regularly — especially during uncertain economic times. If you haven’t already, meet with a financial advisor to review your strategy and ensure you’re well-positioned to handle whatever comes next. An advisor can help you navigate market volatility and identify ways to optimize your income and investments in the face of a recession.

Conclusion

While a looming recession may feel intimidating, you don’t have to face it unprepared. By taking a proactive approach — evaluating your investments, building a cash reserve and managing withdrawals wisely — you can safeguard your retirement plan and continue enjoying the life you’ve worked so hard to build.

Remember, recessions are a normal part of the economic cycle. With the right strategies, you can weather the storm and come out stronger on the other side.

Lyle Boss, endorsed by Glenn Beck as the premier retirement advisor for Utah and the Mountain West states. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.