Inside Creative House / Getty Images/iStockphoto
If you’ve been working hard and diligently saving, you may be looking forward to an early retirement. But what happens if, just as you’re ready to walk out the office door for the last time, a recession hits? Should you retire early during a recession? If you do, what could happen? And what should you do? Here’s what you need to know.
What Happens During a Recession?
A recession is defined by most economists as two consecutive periods of negative GDP growth. This means that the amount of goods and services that are produced in this country, known as gross domestic product, declines for two straight quarters. During a recession, prices tend to go up as seen with inflation, jobs become scarce and consumer spending declines.
What Should Retirees Do During a Recession?
If a recession is accompanied by a down stock market, it can be a risky time to retire. But that doesn’t mean it’s impossible. And there are steps you can take if you are already retired. Here are some things to think about.
If you are newly retired and still relatively young or considering retiring, you could pick up a part-time job to supplement your income. It could be something you’ve always wanted to do or something you can do from home. Try to let go of any preconceived notions of what you should be doing and try something that you’ve always dreamt of doing.
Be aware if you’re already collecting Social Security — if you’re under your full retirement age — Social Security will deduct $1 in benefits for every $2 you earn above $19,560 in 2022. Once you reach full retirement age, you can earn as much as you want and your benefits won’t be reduced.
You could also consider other sources of income. If you are entitled to a pension, you may be able to live off that until the markets recover.
Reducing expenses is another option. Selling the large home where you raised your children and moving to a smaller home in a less expensive area is one option. You may find you only need one car instead of two when you’re retired. Take a good look at your budget and see if you’re paying for things you no longer need.
Postponing Social Security if you’re not already taking it can be a good option for many people. If you have other sources of income, wait until age 70 to begin collecting Social Security. Your benefit grows 8% per year between full retirement age and age 70, so waiting can pay off. You get the higher benefit every month …….