Safeguarding Retirement: Lessons from Past Recessions

Safeguarding Retirement image
Common mistakes, winning strategies, and tools to help you prepare your retirement savings for the next recession.

With the possibility of a recession looming over the United States, many people are trying to be as proactive as possible and asking, “How do I prepare for a recession?”. A recession causes financial uncertainty in the short term and can also impact retirement savings in the long term. 

Many factors are currently outside our control such as stock market fluctuations, interest rates, and even unemployment. However, there are strategies to help protect your personal finances from the impact of these shifts in the economy. We have a lot to learn from historical recessions.

During previous recessions, we typically see two very common mistakes; pulling out of the market entirely and stopping retirement investments.

Pulling out of the market entirely: During an economic downturn, it is common for the fear of loss to prompt people to pull and liquify most of their assets. However, looking back on previous recessions, the market has rebounded and positioned investors for recovery gains. For example, according to The Wall Street Journal, the S&P 500 has taken approximately 6 years to recover after previous recessions. This may seem like a long time to wait, especially for those nearing retirement, but if you can afford the time commitment it may be worth the wait.

Stopping retirement investments: Market uncertainty and focusing on essential expenses may lead people to stop saving for retirement.  However, even if you must reduce the amount you’re contributing, you could still see long-term gains on investments made during the recession. If you’re making investments in a market low, you will have greater room for positive returns as the market recovers. 

These common mistakes can be seen throughout the last 14 United States recessions. However, there are also winning strategies that have helped other investors effectively protect their retirement savings. Their overarching focus has been on diversification, continuous contribution, and planning for the long term.

Here are five historical retirement saving strategies we can learn from:

1. Diversify your portfolio

This is arguably one of the most important risk management strategies and follows the sentiment of “Don’t put all your eggs in one basket”. Diversification serves as a growth strategy during times of financial stability as well as a protective strategy during recessions.

Even if certain investments perform poorly, others might continue to do well, which could offset losses and promote long-term stability in the face of downturns in the economy. Investing in a variety of sectors is another way investors diversify their portfolios because certain industries do better than others during each recession.

2. Delay Social Security benefits

In the United States, people can start collecting Social Security benefits as early as 62 years old. However, if you start collecting before your full retirement age of 67, then you can expect a 30% reduction in your monthly benefits. For every year you delay past 67 years old up until you’re 70, you get an 8% increase in your benefit.

Delaying social security benefits is another smart move that retirees have made in past recessions. This strategy gives retirees more money when they begin to receive social security benefits.

3. Maintain 401K contributions

Previously we mentioned that one of the mistakes many people have made is stopping their retirement investments during a recession. However, maintaining a contribution to a 401K even at a smaller contribution level can still be beneficial.

This enables future retirees to enter the market at a low and have the greatest opportunity for long-term returns. In addition, if you have an employer that offers a 401K match it can be extremely beneficial to take advantage of this opportunity of adding free money to your retirement savings.

4. Invest in defensive stocks

During the COVID-19 recession, elective spending decreased substantially, but necessities like utilities, healthcare, and consumer staples persisted. Defensive stocks-—which represent companies with stable earnings—typically do well no matter how well the overall economy is performing. Investors who have contributed a portion of their retirement funds into these “recession-proof stocks” have placed their portfolios in a better position to withstand market declines.

5. Multiple sources of income

Unfortunately, a common staple of recessions is job losses. Preparation is a good idea because it’s unclear which industries will be impacted and when. Spending time on other ways to make money can reduce financial worry when job security is uncertain. 

This can include taking on a side hustle or investing in an asset that earns a profit. Additionally, exploring these options can help make up for any lost income if a layoff occurs. 


In addition to these strategies, it can also be helpful to turn towards technology to help you prepare and protect your retirement savings in a recession.

1. Betterment

Betterment is an app that allows you to track, save, invest, and optimize your retirement savings. The app provides users with retirement advice and tax-saving strategies that can help users save more in the long term. They also offer their own checking and retirement savings accounts for those looking to start their retirement savings journey.

2. Charles Schwab Retirement Calculator

Charles Schwab’s Retirement Calculator can help you answer the question, “Am I saving enough for retirement?” The calculator will ask you questions about your retirement plans and investment style to help with your retirement analysis. This tool helps guide users to improve their retirement savings so they can reach their goals on time.

3. Fidelity Retirement Score

Fidelity Retirement Score is an interactive calculator that will provide users with a score based on their current retirement plan. Fidelity estimates their monthly retirement needs and their current projected retirement savings.

4. Mint

Mint is an all-in-one money management app provided by Intuit. Users can see all their accounts, make a budget, discuss bills, and monitor financial goals and investments in one place. This app is great for someone who wants a complete financial tool with more than just retirement savings information.


Overall, when preparing for a recession and protecting your retirement savings there are 3 main takeaways: diversification, continuous contribution, and planning for the long term. Tools and resources are available to help you manage your retirement savings during a recession. We can learn plenty from previous recessions and it’s important to keep in mind that the economy has always rebounded.

Disclaimer: Any and all information provided by Invisibly ( is made available solely for informational and educational purposes only and does not constitute professional tax, investment, or financial advice. Always seek the advice of a qualified professional or provider with questions you may have regarding your situation.

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