How to Save for a Financial Downturn During Retirement

Tempura /

Nobody likes to plan for the worst-case scenario. However, if you ever find yourself in a bad spot, having some money saved up can do wonders for your financial situation. Without forgetting to contribute to your peace of mind.

One of those potential emergencies can be a financial downturn, which can hit especially hard if it happens during your retirement years. In retirement, living on a budget is much more common – and often necessary. These types of slowdowns can be caused by anything, whether it’s a medical emergency, a car problem, or a home repair, but they’re issues that will take up a big chunk of your life. this budget.

Related: 10 Reasons You Should File for Social Security Early
More: 10 kitchen renovations that will hurt your home’s value

Fortunately, there are ways to better prepare for these types of situations should they arise. For advice on the best way to save for a financial downturn during retirement, GOBankingRates spoke with Chaim Geller, financial adviser and founder of

Retirement Savings 101: Build an Emergency Fund

First and foremost, if you’re preparing for a financial downturn, view it as a potential emergency and treat it as such.

“Create an emergency fund account,” Geller said, and tailor it specifically to your retirement budget. “You should designate a separate savings account as an emergency fund and be sure to include enough money for two to three months of expenses.”

Once you’ve calculated how much you’ll need to cover a two- or three-month gap, put it in a separate savings account designed just for that purpose. Having it in a second account will help the possible temptation to delve into it from time to time.

As you build that fund, don’t be afraid to start small. Set a goal of a few hundred dollars and contribute when you can. Once you reach this milestone, you can continue to set bigger and bigger goals until you have three months of spending. Or more, if you choose.

Talk to your financial institution about the best possible options for this specific type of emergency fund. Most banks offer savings accounts designed specifically for these things, which are known for their higher interest rates. These options, including money markets, should be accessible without taxes or penalties. That way, as Geller explained, “it will be money that will be available to you just in case of a sudden financial downturn.”

POLL: Are you worried about the April stock market decline?

Don’t be afraid to use the emergency fund – for an emergency, that is

Admittedly, it is possible that situations will arise where it requires hovering a bit over this designated emergency pleasure. While that’s not ideal, Geller said it’s allowed under certain circumstances. “If you ever use your emergency fund, be sure to replenish it,” he said. “Just as you needed the funds yesterday, you may need them again in the future.”

Of course, just as you shouldn’t overwork building the fund, don’t do the same if you need to repay the fund either. “You don’t need to fill it in a month. You can slowly replenish it by adding a few hundred dollars a month until you reach the necessary level. This is the same strategy you should use when initially building the fund.

Once the emergency fund is up and running, Gellar said you’ll want to make sure the money you use for it is “fully liquid.” Specifically, he explains that the fund “should be in a regular savings account, not even on the stock exchange,” to avoid any potential complications.

Markets tend to fluctuate and you don’t want to depend on something so potentially volatile when a situation arises where you need cash. These high-interest savings accounts “help you quickly access your funds in the event of a sudden financial downturn, even if the stock market is down at the time or the real estate market is not doing well,” said Geller said.

When researching which type of account to prepare best, Geller advised avoiding “the impact of inflation” by looking for a savings account that pays the best interest rate. This way, your funds will not only be accessible, but they will even work for you in the meantime.

More from GOBankingRates

About Scott Conley

Check Also


Filed pursuant to Rule 424(b)(5) Registration number 333-266555 The information contained in this preliminary prospectus …