Financial Planning

3 Tools to Help Survive Hard Times

Life is unpredictable, but that’s no reason not to have an emergency plan. This is especially important in retirement, when you must replace your paycheck and decide how to use your savings. Your retirement could be decades long, and there could be market downturns or personal hardships during that time. Here are three tools to help survive hard times.

An Emergency Fund

First, assess your emergency fund, or create a plan to make one. Ideally, an emergency fund would cover all essential expenses for a few months. This could be necessary in the event of job loss, investment income loss, or an unexpected medical expense. An emergency fund may include a steady source of income, especially if you’re already retired. Without a pension to rely on, many retirees have the necessity of creating guaranteed income streams in retirement.

A Social Security Maximization Strategy  

If you experience financial hardship, you might rethink your Social Security claiming strategy. The earliest you can claim Social Security benefits is age 62. However, claiming benefits before your full retirement age will result in a permanently smaller benefit. If you wait to claim past your full retirement age, your benefit will increase by 6 – 8% per year you defer until age 70.[1] If you think you need to claim earlier than you originally planned, keep in mind that you have one year after claiming to suspend benefits. You can repay your benefits within a year and go back into deferral.[2] This way, you can still receive a larger monthly benefit by delaying your Social Security benefits.

A Long-Term Investing Plan

Create a long-term investing plan, regardless of what’s happening in the here and now. Avoid making hasty decisions based on emotions, such as locking in your losses by pulling out of all your investments. Instead, you might review your asset allocations, reassess your risk tolerance, and consider your income needs now and in the future.

You might be wondering when society, as well as your financial situation, will return to “normal.” Eventually, markets will rebound, but for those nearing and in retirement, this may not be soon enough. There will likely be other market drops in your lifetime, so consider planning for them. We can help you create a retirement plan that doesn’t overlook the possibility of hard times.