Many economists worry that there’s a recession on the way in 2023. If you’re approaching the end of your career, you may be worried about retiring in these uncertain times. Taking withdrawals in a down market during the first few years of retirement can significantly reduce your portfolio’s longevity, so your concerns are understandable. 

However, with proper planning, you may not need to delay your retirement. Here’s how to cash proof your retirement so you can still enjoy your golden years even if the stock market underperforms. 

How to Cash Proof Your Retirement 

Wondering how to cash proof your retirement so you can exit the workforce as planned despite economic uncertainty? Keeping enough cash (hence the term “cash proof”) in your bank account to cover your living expenses for the duration of the recession can help mitigate the risks of retiring during a downturn. 

Financial experts say that in a worst-case scenario, it takes about 39 months for a portfolio with 50% bonds and 50% stocks to bounce back from a recession. So if you want to be conservative, you should keep enough money in your bank account to pay your bills for two to three years. That way you can feel confident in your ability to ride out the recession without selling assets at a loss and exposing your portfolio to sequence of returns risk. 

But if you don’t want to keep that much cash on hand during this high inflationary period, experts say you could get by with a one-year emergency fund. This gives you enough time to find a part-time job or devise another plan for generating income during the recession so you don’t have to take withdrawals. 

Other Ways to Recession-Proof Your Portfolio 

Revisit Your Asset Allocation

In addition to keeping a cash buffer on hand, it’s a good idea to recession-proof your portfolio in other ways, such as revisiting your asset allocation. In your 60s, experts recommend that you hold 40% to 50% of your portfolio in bonds. However, as you transition to retirement, you may want to increase your bond exposure to 60% or 70%, especially with the threat of a recession looming. 

In addition to bonds, you can also invest in other low-risk assets such as certificates of deposit, annuities, money market accounts, or even defensive ETFs and mutual funds. Defensive funds invest in companies in essential industries that tend to do well even during recessions, such as utilities and health care. Moving some of your nest egg into these safer investments can help you sleep better at night, whether you decide to move forward with your retirement plans or work for a few more years. 

Reduce Expenses 

Cutting back and reducing your expenses will also help you weather a potential recession. Learning to live on less will enable you to stretch your savings further if you end up relying on them to pay your bills. Having less debt and lower monthly costs makes you more financially flexible and adaptable, which is an advantage in times of economic uncertainty. 

Getting frugal now will also allow you to pay down debt and save more money. If a recession does occur in 2023, you’ll be grateful you have a bigger nest egg to fall back on and less debt.

If you’re approaching retirement age, what steps are you taking to secure your financial future in these uncertain times? Share your tips in the comments section below! 

Read More 

Raising Kids Without All The Merch

Prepping for Your Retirement Hobbies

3 Signs You Are About To Run Out of Retirement Money

Come back to what you love! Dollardig.com is the most reliable cash-back site on the web.  Just sign up, click, shop, and get full cashback!

Vicky Monroe
Vicky Monroe

Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.