A recession is never easy for anyone. Trying to make ends meet while still saving for retirement can be extremely frustrating. The key is to try and keep saving regardless of how much you would like that extra cash now instead of later.
It is possible that by the time people retire they may have seen around 5 or more downturns in the market leading to a recession. People must take the right steps to ensure that they can make it through these recessions while still saving for retirement.
Newsweek suggests 3 things to increase your savings: (1) working longer, (2) keep contributing to your retirement savings, and (3) delaying your social security. If you do these 3 things, it can increase the purchasing power of someone around 62 years of age by 30%.
However, sometimes people don’t have a choice and have to retire earlier than they would have liked. If this is the case for you, try to find some part time work to keep things going. Another way to bring in some short-term cash during a recession could be to go through all of your belongings and sell some things at a garage sale. Although this may not generate a ton of cash, it can be helpful when times get tough.
Whether you are young or almost at retirement age, planning is still a must. There are things that you should and should not do during a recession that will help you out in the long-run.
DON’T SPEND MONEY YOU DON’T HAVE
Don’t spend before you actually get the money. Spending before the money is in your pocket is not a good way to do things. Putting things on your credit card and overspending can put you in a lot of debt that you are unable to get yourself out of. This will also hurt your credit score which can affect you in the future.
DON’T BE LATE WITH PAYMENTS
Being late with any type of payments (student loans, credit cards, etc.) will also affect your credit score and hurt you.
KEEP SAVING
This is huge even if it might be hard to do sometimes. Even putting a small amount of your pay check towards your 401(K) can be extremely beneficial in the long-run. Not only does this help you save on the money that gets taxed, but you are also saving towards your retirement. However, try not to borrow money from your 401(K) until you retire.
According to an article on MainStreet.com, if you borrowed $5,000, you’ll have to repay $1,000 per year in four $250 payments. And further, if you don’t pay all the money back it will be considered taxable income and you will also pay a 10% penalty fee. This is something that you really don’t want to have to deal with!
Although times are tough and groceries and gas are still rather expensive, the key is to stick it out. Everyone is in your shoes and struggling just as much. Some don’t have jobs and are searching at a time when unemployment is at its highest in the past 4 years.
Just remember, try to keep saving! It may be hard to see the benefit in the short-run, but in the long-run you will benefit from your savings in your retirement.
Picture: Michael Connors
Related Links:
Be Prepared! Start an Emergency Fund Today
Three Tips to Recession-Proof Your Budget
Retiree Health Coverage On the Decline
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