How To Prepare for a Recession if You Are Retired

How to Prepare for a Recession if You Are Retired

Retired couple preparing for a recession

As a wealthy retiree, it pays to shore up your finances as we potentially enter a recession in 2023.

Wondering how to prepare for a recession if you are retired? It presents unique challenges compared to those still in the workforce.

In today’s post, we describe three financial moves you can make to prepare for a recession if you are retired, and one move to avoid.

Tip: For straightforward financial advice, subscribe to The Adviser You Can Talk To podcast. Also, click here to explore and sign up for more of our expertise on a variety of topics in various formats.

Move #1—Maximize Cash

If you’re sitting on considerable cash in your local savings bank or credit union, speak with a wealth adviser about alternative cash-like, liquid investments that may generate higher returns to offset recession impact.

For example, according to, the national average yield for savings accounts is approximately 0.23%. Yet, Fidelity’s Government Money Market Fund (SPAXX) 7-day yield as of Jan. 25, 2023 is 3.93%—substantially more.

Many high-net-worth individuals hold hordes of cash in low-interest savings accounts because they want immediate access, yet most financial institutions today can quickly transfer your cash from a higher-interest account via electronic funds transfer. Your cash, therefore, will likely arrive in your checking account within one-to-three business days.

Tip: How have investments typically done during recent bear markets? Check out our posts on how the 60/40 Approach and a more conservative portfolio allocation have held up historically.

Move #2—Minimize Health Care Expenses

As you have likely discovered, Medicare doesn’t cover all your health care costs. It’s important, therefore, to revisit your health care options each year to proactively manage cost increases.

Alert: Medicare Advantage open enrollment is happening right now (from Jan. 1–Mar. 31). This is an ideal time to revisit the critical components composing your plan, including coinsurance, copayments, deductibles; and ensuring your preferred doctors and specialists are still part of your plan’s network.

Save Money Using Alternative Health Care Services

Changing how you seek medical care may lower your out-of-pocket costs, i.e., visiting a walk-in clinic could be less expensive than your health plan’s emergency room deductible.

Humana provides a detailed example, “Medicare Part B usually covers emergency department services when you have an injury, a sudden illness or an illness that gets worse quickly. If Medicare Part B does pay some of the ER costs, you still pay:

  • A copayment for each ER visit
  • A copayment for each hospital service
  • 20% of the Medicare-approved amount for your doctor’s services
  • The Part B deductible ($226 in 2023)”

Let’s say you need stitches.

Many individuals would head directly to an emergency room. But what if you only needed a few stitches?

The average cost for up to five stitches at an urgent walk-in care center is $149.50, compared to Medicare’s Part B $226 deductible (plus ER copayment and copayment for each hospital service).

If you can safely pause before heading to the emergency room and consider alternative services, you may experience significant savings and offset some recession impact.

Related: Comprehensive Medicare Resources

Medicare Made Simple (complimentary special report)

How to Select the Best Medicare Advantage Plan (blog post)

Fine-Tuning Your Medicare Coverage (blog post)

Medicare Made Simple (podcast)

Tip: Understand the latest trends impacting Medicare and Medicare Advantage by visiting our health care information center.

Move #3—Be Selective About Home Improvement Projects

There’s been unrelenting press regarding construction material scarcity and costs and difficulty finding skilled contractors during the pandemic.

During a recession, however, prices tend to decrease and layoffs are more frequent. These two outcomes can make a large home improvement project more financially appealing.

Before proceeding with your home construction project, however, consider the specific project and related financial impact.

For Example:

The cost for home insulation material is leveling off. A smart financial move, therefore, could be utilizing the 2022 Inflation Reduction Act tax credits for installing additional insulation in your home. (See for qualifying insulation types.)

Tip: Understand how the Inflation Reduction Act creates Clean Energy Tax Credits for High Earners.

What Not To Do During a Recession

Recessions increase financial uncertainty and, therefore, retirees should avoid taking on additional debt, like a new vehicle loan or co-signing a loan for your adult child.

What Not To Do During a Recession

Recessions increase financial uncertainty and, therefore, retirees should avoid taking on additional debt, like a new vehicle loan or co-signing a loan for your adult child.

Simple Example:

Let’s say your adult child has a business idea and asks you to co-sign a commercial real estate lease. Most parents want to help, however, your (and your child’s) financial risks increase during recessions, i.e., the ability to pay the lease versus increasing shipping costs, shrinking consumer spending, etc.

Tip: For more on retiring during a recession, check out our recent webinar, From Recession to RMDs: Our 2023 Outlook.

In Summary

Recessions often create financial worry, particularly regarding the stability of your investments.

Still wondering how to prepare for a recession if you are retired? Revisit your retirement spending plan with your wealth adviser to help ensure your plan’s integrity remains on track.

Contact Adviser anytime for assistance. We pride ourselves on being The Planner You Can Talk To.

Tax and legal information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice. Always consult a licensed attorney or tax professional regarding your specific legal or tax situation.
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