3 Savvy Ideas for Retirement Savings During a Recession

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You’ve probably heard that a recession is coming more times than you can count over the past year. By now, you may be wondering, is it true? The short answer is, yes – maybe.

Doctors in the US are faced with an increasingly uncertain economic climate — almost everyone is. Retirement can seem like a distant dream, but there are strategies that can help maximize retirement savings during a recession. We have listed 3 savvy ideas for retirement savings. But first, let’s go over some facts associated with the current state of the economy.

DISCLAIMER: We are not experts.

The Recession, Is It Real?

The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

The factors the NBER assesses include consumer spending and employment, among others. In the first half of 2022, U.S. Gross Domestic Product (GDP) decreased for two consecutive quarters, although it increased at an annual rate of 2.6% in the third. Inflation is continuing to soar at 8.2%, reaching its highest increase in 40 years. Unfortunately, these signs are causing more and more economists to predict a recession.

This may probably sound bleak to some, but it doesn’t mean that your retirement savings have to suffer. Having a financial plan in place is the best thing you can do for yourself during the recession, and that includes thinking about ways to save money for retirement.

Here are our ideas to help you.

1. Be Wise With Your Investment Decisions

During a recession, it’s important to be selective with your investments. Consider investing in low-risk, income-generating assets such as bonds and CDs that offer good returns and are less prone to market downturns.

As a busy professional, you may not have the time to manage your own investments. Working with a financial advisor can help you make informed decisions that best suit your needs. Also, take the time to really assess your financial situation and potential risks. A doctor may be earning more than regular professionals, but the future is always unpredictable.

It’s also a good idea to diversify your investments. Choose different asset classes, such as stocks, bonds, real estate, and cash equivalents, to reduce risk and potentially add to long-term gains. A portfolio that provides exposure to both domestic and international markets can be beneficial in times of economic uncertainty. When the US market is performing poorly, international markets may be doing better.

2. Maximize Retirement Savings With Tax-Advantaged Accounts

One of the best ways to maximize retirement savings during a recession is by taking advantage of tax-advantaged accounts such as Traditional and Roth IRAs. All contributions you make to these accounts are not subject to income taxes until you start withdrawing after retirement.

Essentially, some retirement accounts offer tax benefits, like a 401k, 403B, 457. With these accounts, your contributions are deducted from your income to calculate how much you should pay in taxes. It’s essential to leverage these benefits on your wealth-building journey.

It’s also important to note that if you make the maximum allowed contribution to either of these accounts, the amount you save for retirement could be substantially higher than if you were just saving in a regular savings account. And remember, each income tax bracket comes with its own set of benefits and drawbacks.

3. Consider Long-term Care Insurance

Long-term care insurance can help to protect your retirement savings during a recession. This type of insurance typically covers the costs associated with living in a skilled nursing facility, home-based care, or other services like occupational therapy. With long-term care insurance, you can have peace of mind knowing that your retirement is protected if an unforeseen medical event arises.

A recession can be a difficult time for many, especially doctors. However, by taking the proper steps to maximize retirement savings during this time, you can ensure that your financial security is secure. Talk to a financial advisor about these strategies and more to help you make the most of your retirement savings during a recession.

Final Thoughts

It’s understandable to feel overwhelmed when you start planning for retirement, especially during a recession. However, it’s important to take the right steps now in order to ensure financial security later on. Tips such as being wise with your investments, making use of tax-deferred accounts, and considering long-term care insurance are all great ideas for doctors during a recession.

With the right strategies in place, you can be confident that your retirement savings will remain secure even during times of economic uncertainty. Prepare ahead for the new year. Remember, don’t go broke on the holidays trying to give everyone presents.

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