5 Ways Retirees Can Prepare for a Recession…in Reverse

If there’s one thing that can upend retirement plans it’s a recession which an increasing consensus of economists are predicting for the US economy. Indicators like a weakening labor market, stubbornly high inflation, and declining manufacturing activity all point to a potential economic slowdown. So, how can retirees or those nearing retirement brace for impact?

Let’s examine the five most common strategies economists and financial columnists suggest for retirees to best prepare for a recession and how a reverse mortgage could play an important role.

1. Boost Your Savings.

or older Americans nearing retirement, it’s essential to have sufficient savings to handle unexpected challenges. For those still working, the biggest threat might be an unforeseen layoff. Having enough savings to cover expenses while applying for unemployment or searching for a new job can mean the difference between a financial crisis or a temporary setback.

Solution: A reverse mortgage could offer a lifeline for those aged 55 and over. It allows homeowners to access their home’s equity, potentially eliminating the need to find new employment. Even if they choose to keep working, a reverse mortgage can free up money by eliminating monthly mortgage payments, which can be redirected into savings or investments during their working years.

2. Pay down debt.

Debt is the bane of retirement. The burden of monthly payments saps away at a retiree’s quality of life or could prevent one from retiring altogether. As Dan Hultquist highlighted in a recent interview , strategies like the debt snowball method can help pay off debts faster. However, a more effective approach may be a “debt avalanche,” which pays down high-interest debt first. However, a debt avalanche could be employed by transforming high-interest debt into a payment-optional HECM Consolidation Loan.?

Solution: Older homeowners struggling with debt may benefit from consolidating it into a reverse mortgage, which can eliminate the burden of monthly payments. This can provide much-needed financial relief by eliminating the burden of mandatory mortgage payments.

3. Build an Emergency Fund to Ride Out Market Downturns

What could go wrong with a stock portfolio in a recession? A lot.? As AARP pointed out in its June 2022 blog, retirees should aim to have a cash reserve that covers up to a year’s worth of expenses. This fund can help them avoid selling investments in a down market or shortening their sustainable withdrawals?

Solution: A HECM (Home Equity Conversion Mortgage)...

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