How to Prepare for a Recession: Things to Do Today to Future-Proof Retirement

A recession is when the economy shrinks — there is less trade, less consumer spending, and the gross domestic product shrinks for more than two measurement periods (typically measured in months or quarters). It usually results in job losses, which can shrink the economy more.

The Great Recession of 2008-09 was the worst financial crisis that most of us witnessed in our lifetimes, and it lasted longer than any other. 1 We as a country and as financial professionals learned a lot during that time, as well as in the year 2020, when a global pandemic affected the world in so many new ways.

Our clients worry about economic uncertainty, no matter how sound and diverse their investment portfolios are. Here are some of the things we discuss when our financial professionals meet with Lundervold Financial clients. 

The Truth About ‘Future Proof’ Investments

We prefer to think in terms of future-proofing retirement portfolios, rather than future-proofing investments. The way we do this is by helping you build a portfolio that is based on your risk tolerance, your retirement goals and how much time you have until retirement. Using that information, and our own data and historical research, we consider worst-case scenarios (alongside best-case possibilities) to help our clients make decisions so they can plan for the future.

Showing a client that a plan can work for them, even during a recession, gives them a sense of freedom and confidence in their decisions.

The caveat here is to be skeptical when anyone talks about recession-proof retirement and investment tools. 

What Are the Best Investments Before, During and After a Recession?

Ah, if only it were that simple, to say, invest in “XYZ” in a recession and you’ll be safe. No qualified and trustworthy financial advisor would answer that question, because the answer is not that simple. In fact, our legal team would shut us down if we tried to answer that question in that way!

Diversification is always the best defense to any economic downturn. We help you make sure your retirement strategy includes financial tools that align with your goals and risk tolerance.

The best investment is one that gives you confidence, even when the markets are down, based on historical data and predictive models; but we will never mislead you to believe any investment is fool-proof.

Again, this is why we speak in terms of future-proof portfolios, rather than future-proof investments.

How to Prepare for a Recession if You Are Retired

If you are retired, your concerns about the financial impact of a recession are different than they were 10, 20 or more years ago. Make sure you have income stability. If you are taking your income from investments in the market, when the market drops 10%, so will your income. You want to be taking income from an investment/product that will not drop with the market. By protecting this downside risk, you protect your income stability as well.

We know this is a general answer to a general question, so the best answer we can give to retirees who want to protect themselves against economic downturns is to meet with a financial advisor who can look at your portfolio, your income, your goals, and your risk tolerance to help you make financial decisions.  

How to Prepare for an Epidemic or Flu Pandemic?

If there is one thing we learned in 2020, it’s to expect the unexpected. The smartest way to financially prepare for an economic crisis is to diversify your investment portfolio. Period.

We at Lundervold Financial follow a five-point Blueprint for Financial Clarity that includes (1) a retirement income plan, (2) an investment strategy, (3) a strategy for addressing taxes in retirement, (4) a strategy for addressing healthcare and medical costs as you age, and (5) a plan for your financial legacy.

Time in the Market vs Timing in the Market

Timing the market is very difficult. You have to be right twice: Buy at the right time and sell at the right time. An important point to remember is that with every recession comes an eventual recovery. 

Yet, we still see knee-jerk reactions to changes in the markets. A Morningstar article shows market downturns, recoveries and expansions over nearly 100 years (from 1926 to 2020). This serves as a powerful reminder of the cyclical nature of finance, and it also reminds us that long-term gains offset short-term losses.2

Buying low and selling high is easy in theory. Often times we see that when the markets go down, investors get nervous, and buying is the last thing they want to do. It is important to stay calm and let your financial advisors do the worrying for you. Investing for retirement is a long-term strategy.


1 Kimberly Amadeo and Brian Barnier. The Balance. May 29, 2020. History of Recessions in the United States: Causes, length, GDP, and unemployment rates. Accessed Dec. 11, 2020.

2 Tom Lauricella. Morningstar. March 16, 2020. 3 Charts That Show Why Investors Should Stay the Course Throughout Market Turmoil. Accessed Jan. 7, 2021.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Neither our firm nor its agents or representatives may give tax or legal advice. Be sure to speak with a qualified professional about your unique situation.

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